New York Governor Andrew Cuomo got his election-year wish: a $2 billion tax cut package that doles out goodies to Wall Street banks and rich homeowners. Cuomo, a Democrat who likely has presidential ambitions, sold the tax cuts under the false promise that they would help New York businesses “thrive.” Tax cuts have become something of an obsession for Cuomo, despite the fact that important public investments have been neglected by five consecutive years of austerity budgets.
Here’s a run-down of the tax changes in the budget deal:
Property tax: A three-year property tax rebate program will cut homeowners’ taxes by $1.5 billion by “freezing” the amount many currently pay. But the cuts won’t be evenly distributed and generally won’t target those most in need of relief. For those living in local jurisdictions that comply with a 2 percent property tax cap and working to consolidate services with neighboring jurisdictions, the state will send homeowners (only those with household income under $500,000 qualify) a check for the amount of any increase in property taxes over the prior year (the checks are conveniently scheduled to be sent out for right before the November elections). For those living in New York City, which is not subject to the tax cap, low-income homeowners and renters will be eligible for a small, refundable property tax circuit breaker credit which will cost $85 million a year. Unfortunately, an expanded circuit breaker tax credit available to homeowners across the state-- one of the best ways to provide targeted property tax reductions-- was dropped from the final bill.
Business taxes: Corporations will get more than $500 million in tax cuts, including a permanent across-the-board corporate income tax rate cut from 7.1 percent to 6.5 percent. Manufacturers will be zeroed out from paying the corporate income tax altogether and will also receive a new property tax credit. Though Cuomo has heralded his business cuts as a boon to manufacturers, they in fact already pay very low rates (Our recent state corporate tax study found that Corning, for example, paid only a 0.3% state tax rate on $3.5 billion in profits over the past five years) and the primary beneficiaries are predominantly Wall Street banks. The package eliminates the state’s bank tax, subjecting banks instead to the corporate income tax, and also allows them to pay only 8 percent of their income from qualified financial instruments (securities) under the assumption that 92 percent of their income from these sales comes from customers outside of New York.
Estate tax: Though there had been talk of also lowering rates, legislators ultimately agreed to cut the state’s estate tax by increasing the exemption from $1 million to $5.25 million, the threshold currently used at the federal level.
We’ll let others analyze the budget as a whole, which is worth $138 billion and includes important provisions on charter schools, pre-K, and campaign finance. But on the tax front, the bill falls far short of the type of targeted, progressive reform that is so badly needed.