December 30, 2013
One of the top issues of the 2014 legislative session will be taxes. While Governor Andrew Cuomo wants to cut taxes, some, including New York City Mayor-elect Bill de Blasio, want to raise them.
In a year where Governor Cuomo and all 213 of the state’s legislative seats are up for re election, it’s not a big surprise that the legislative session would focus on tax cuts.
Governor Cuomo appointed two tax commissions to study the issue, but even before they were finished, he was already signaling his intentions.
“I believe that we’re going to have revenue at the end of this year, that we can be talking about a tax cut next year” Cuomo said back in October. “That’s very exciting.”
One of Cuomo’s tax commissions, chaired by former Governor George Pataki and former State Comptroller Carl McCall, recommends numerous business tax cuts, including cutting the corporate tax rate, raising the threshold for the estate tax to over $5 million and more quickly phasing out an energy tax.
It also includes a plan that could result in a property tax freeze, if local governments and schools agree to hold the line on spending for the next two years, In exchange, they’d get state subsidies to add up to 2% in additional spending each year. Taxpayers could see a rebate in the form of a circuit breaker, if it’s determined they pay too large a portion of taxes in proportion to their income.
The plan has divided businesses and unions. Heather Briccetti, President of the State’s Business Council, is on the commission. She spoke to public radio and television in early December about the benefits the tax cuts could bring.
“Obviously, business taxes are very high. If you can do something to alleviate that burden, there’s more opportunity for job creation, Briccetti said.
She says business pay 40% of the property taxes in the state.
The major unions in New York disagree with the tax cut plan. The state worker union Civil Service Employees Association’s Steve Madarasz says New York doesn’t need another tax “giveaway” for the wealthy and corporations. He also thinks the property tax reduction would come at the expense of local services, because local governments and schools would have to cut back in order to freeze spending. Madarasz says the plan does nothing to address the real needs of the state.
“Real people and real communities are suffering,” Madarasz said. “We’re not seeing the economy improve.”
EJ McMahon, with the fiscally conservative think tank The Empire Center, is also skeptical of the property tax freeze plan, but for different reasons. He says there’s too much election year politics in the tax commission’s recommendations. McMahon says while he believes the business tax cuts would be beneficial, the plan to achieve a freeze on property taxes would require shifting money from the state budget to pay for it.
“The real purpose of the property tax proposal is political,” McMahon said. “It’s not economic.”
Others see hope in the tax commission’s proposal for what’s known as a circuit breaker. It would provide state subsidies, in the form of an income tax credit, for lower income New Yorkers who pay a high percentage of their earnings in property taxes. Ron Deutsch, with the progressive coalition New Yorkers for Fiscal Fairness, says if properly designed, the circuit breaker could target aid where it’s most needed.
“The devil is in the details,” Deutsch said.
The governor’s tax commission recommendations will likely frame the debate, but the legislature will have influence on the final details.
Senate Republicans say they would like to go even further and enact a permanent state spending cap.
Assembly Democrats say they like the goal of reducing property taxes. But Assembly Speaker Sheldon Silver says the cuts cannot come at the expense of funding for schools and other important programs.
“We have to look at the whole thing on balance,” said Silver. “And remember that we still have to support schools in this state and a lot of other things that are necessary.”
The state already has a property tax reduction program in place, known as STAR, but critics say it is only provided a state subsidy to buffer ever rising school property taxes. Governor Cuomo and lawmakers have already approved rebate checks under the STAR program. Every New York household with children with an income of less than $300,000 a year will get a $350 payment. Those checks are due October 2014, just a month before elections.
There is also likely to be some discussion in 2014 over income tax rates. New York City Mayor-elect Bill de Blasio campaigned on increasing taxes on the wealthy. The state already has a temporary tax surcharge on New York’s richest and Gov. Cuomo has said he does not think there’s a need to make any more changes right now. He says he thinks high property taxes are among New Yorkers’ chief grievances.
“You ask people what is your income tax rate, nobody knows,” Cuomo said. “You ask them what their property tax is, they can tell you the number to the penny.”
Cuomo, who is likely to include the tax cut plans in his new state budget, says he believes that by keeping spending flat in some areas, he can muster enough funds to pay for it without any spending cuts.