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NY Democrats Learn Econ 101 The Hard Way, Tax Revenues Plummet By 2.8 Billion As Rich Flee Exorbitant Taxes

Opinion| On Monday, Governor Andrew M. Cuomo announced that state income tax revenue had dropped by $2.8 billion.

He explained that this means he will be revising the budget for 2019-2020 and will also be reconsidering funding for health care, schools, as well as roads and bridges repair.

Newsday reports:

Cuomo, a Democrat, blamed the shortfall on a federal tax plan backed by Republican President Donald Trump. Cuomo said the law’s cap on deductions for state and local taxes at $10,000 was to blame and suggested it is, anecdotally, triggering high-earners to leave New York.

“At this point there is no doubt that the budget we put forward is not supported by the revenues,” Cuomo said at a State Capitol news conference. “It’s as serious as a heart attack.”

Cuomo said he’s not certain what areas might need to be cut, but said the biggest spending areas now are education, health care, infrastructure and another phase-in of a previously approved middle-class tax cut.

The hole in revenues in December, which some analysts have called a December surprise, and continued poor performance in January have created a $2.3 billion drop in anticipated revenues, according to the Cuomo administration. Add that to the $500 million drop in revenues for December that the Cuomo administration had previously projected and the revenue hole is $2.8 billion, according to Cuomo Budget Director Robert Mujica.

A January 24 report from Moody’s Investor Services (which is responsible for monitoring state government finances) highlighted details about the revenue.

In a rare news conference with Cuomo, state Comptroller Thomas DiNapoli stated, “I fear it’s going to get worse before it gets better. It’s not all gloom and doom, but it’s a matter of very, very serious concern.”

DiNapoli stated that tax revenues may rebound, however, he did agree with Cuomo’s comment that things aren’t looking too hot.

In the middle of February, Cuomo is set to release amendments to the budget, which during a January 15 reveal came to $175.2 billion.

Newsday explains that this announcement “serves notice to the legislature, which for the first time in most of a half-century is controlled by Democrats.”

The Assembly and the Senate, which both currently hold Democratic majorities, are planning on adding numerous proposals to the 2019-2020 budget as well. With Republicans losing the majority in the November 2018 midterm elections, Cuomo won’t have Senate Republicans to back him up on “fiscally conservative measures,” according to Newsday.

“Our analysts have seen the same troubling trends in revenue, but we need to look at more information before any drastic decisions are made,” stated Senate Democratic spokesman Mike Murphy.

Democratic Assembly Speaker Carl Heastie of the Bronx stated, “I think it’s still a little too early to determine what we can and can’t do. Is this just a blip? Is this just a delay? I think that once we find out what’s the real cause behind reductions in revenue then I think we can make a formative opinion on where we go from here.”

Newsday explains:

Cuomo blames Trump and his 2017 tax cut legislation for prompting New York’s wealthiest taxpayers to change their legal address to another state to avoid a big federal tax hit. He said he bases this on anecodatal stories, not hard facts yet, but that the behavior of just a few thousand of these high-earners could have a significant impact on state revenues.

Trump’s legislation provides tax cuts for most Americans, but caps the federal deductibility of state and local taxes at $10,000. That means high-income, high-tax areas such as Long Island can no longer deduct their full state and local taxes on their federal income taxes, which can be a major added cost.

To read Newsday’s full report on the matter, click here.

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