Every year at this time, Gov. Andrew Cuomo and the State Legislature wrestle with the state budget, facing an April 1 deadline to get it done.
This year, the process is more contentious than usual, due to several factors, including a $2 billion shortfall in state tax receipts. That drop in revenue could be an early sign that New York’s economy is slowing. If that’s the case, it’s all the more reason the state budget should restrain the high taxing and spending that have burdened us for too long.
The governor’s proposed $175 billion budget would increase total state spending by 2 percent over the current budget. That’s not an insignificant increase, but it’s less than some legislators and special-interest groups are clamoring for. And it would set an example for local governments and school districts that Cuomo also wants to stay under the 2 percent tax levy cap.
The cap has placed some modest restraints on local tax increases, and the governor has wisely called for making it permanent. But some local governments — school districts in particular — have chafed under the cap. They are prodded by powerful public-employee unions and their political allies, who too often cater to them. For these folks, there’s never enough money taxed and spent.
It’s important to remember that New York’s combined state and local taxes are already the highest in the nation. And with the higher tax burden imposed on New Yorkers as a result of reduced federal deductions of state and local taxes, many taxpayers here face such a financial squeeze that leaving New York for lower-taxed states looks more and more attractive.
So how can Albany make up possible revenue shortfalls without tipping the scales irreversibly toward an exodus of New Yorkers? One of the most palatable proposals Cuomo has put forward is an accelerated schedule for legalizing and taxing the sale of marijuana. Other states near New York have moved or are moving in the legalization direction, and as a practical matter, if New York lags behind them in following suit, it will lose large amounts of tax revenue to those nearby states.
The governor has proposed using a portion of the marijuana tax money to help fund desperately needed infrastructure projects here, including improvements to the Long Island Rail Road and the New York City subway. But some legislators from minority-centered districts have raised legitimate concerns about fairly distributing the financial benefits of marijuana legalization and addressing the disproportionate incarceration rates of minorities for minor marijuana infractions. These are concerns that Cuomo and legislative leaders should be able to sort out without holding up on-time passage of the budget and the raising of money to help fix our mass-transit system.
An even more controversial proposal advanced by the governor is congestion pricing, which is basically a way of imposing tolls on vehicle travel within New York City. Some of these funds could be used to improve the state’s highway and mass-transit infrastructure. It’s certainly one way to scrape together extra money to fix our crumbling roads, bridges, trains and subway. Another way would be to blend lower congestion-pricing tolls with a modest increase in the state tax on gasoline. With gas currently at relatively low prices, an extra nickel or dime wouldn’t kill us. It could actually save lives and make commutes more tolerable by helping to fix all those dangerous roads and bridges.
Perhaps the most tempting target for budget revenue, by way of a proposed new state tax, is expensive second homes purchased in New York City. This new tax has a nickname, the “pied-a-terre tax,” and, according to early reports, would be imposed on second homes worth $5 million or more in the city. It would be aimed at the super-rich purchasers of New York’s mega-mansions and penthouses, and could raise an estimated $650 million in annual revenue, which Cuomo proposes be used to help underwrite up to $9 billion in infrastructure bonding.
However the state budget battle works out, let’s hope our leaders will recognize that as a priority, they should be fighting to protect hard-pressed, hard-working, taxpaying middle-class families that are already overburdened by the high cost of government here at all levels. Let’s give New York taxpayers a break.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.