New York Gov. Andrew Cuomo. Photo by Senior Airman Sean Madden, courtesy the New York National Guard.
New York state began the year with a $6 billion hole in its budget, due mainly to runaway Medicaid spending. That figure has since climbed to more than $13 billion thanks to the ravages of the new coronavirus.
Gov. Andrew Cuomo would like the federal government to help out and has made a modest request toward that end. Cuomo figures $60 billion ought to get the job done.
New York is, after all, the state that put “chutzpah” into the American political lexicon. (I do not object to this little bit of cultural appropriation.) And Cuomo is the governor who, not long ago, demanded that the federal government send its entire inventory of ventilators and personal protective equipment to his state as the pandemic ramped up, most seriously but hardly only in New York.
Meanwhile in Albany, the cauldron in which a stew of soak-the-rich proposals never drops below a simmer is boiling once again. Cuomo, a Democrat, mostly held the line against his party’s tax-gluttonous contingent in the state budget enacted last month. He is well aware of how heavily New York state and New York City depend on a small slice of residents and the businesses they own and manage. These are the same people who largely fled the city and its immediate environs when COVID-19 began to run wild. They have been isolating at their beachside and country homes, inside and outside the state, accomplishing much of their work remotely. Cuomo knows it will be devastating if they choose not to come back. But if the state can’t satisfy its fiscal hunger, he may be forced to set the table for lawmakers’ goulash of choice.
New York’s official motto is “Excelsior,” which my teachers at Public School 26 in the Bronx once explained means “ever upward.” That pretty much sums up the state’s attitude toward imposing demands on anyone it perceives as having any wealth worth mentioning, including professionals, executives, business owners and landlords. So, in a way, the motto still fits, even as the state’s population and its position in America’s economy decline. In practice, New York’s creed has devolved from Excelsior to “Gimme More.”
New York’s great expectations are not confined to the nation’s capital, nor solely to wealthy New Yorkers. More than 20,000 out-of-state doctors, nurses, and other practitioners and first responders heeded Cuomo’s cry for help last month when COVID-19 cases overwhelmed downstate hospitals. The manpower surge, coupled with the state’s own efforts and significant federal help (though not the give-us-everything response Cuomo first sought), got New York over the hump.
Many of those out-of-state volunteers are now discovering that they will owe New York state income taxes on the earnings they received while they put themselves on the front lines. For a tax professional like me, this goes without saying. Anyone who works more than a few days in New York (or almost any state with an income tax) generally owes tax to that state. That out-of-state tax is frequently offset by a credit from the worker’s home state, if it has an income tax. (New York City does not tax nonresident commuters, except for some public servants who are on the city’s own payroll. This is not largesse from the city; this is a political sop from Albany to the affluent suburbs that hold the key to power in the Legislature.)
So the income tax consequences of working, even on an emergency basis, in New York make perfect sense to someone like me. They make much less sense to the workers who left their families and their own comparatively safe communities to help New Yorkers in their time of need, putting their own lives and health at risk. It would be a noble gesture if the state decided to waive some or all of its taxes from those people.
Cuomo says he would be happy to do that – if the federal government picks up the tab. Which would mean the communities that sent those volunteers to New York will be ponying up yet again to help Cuomo and his constituents in their hour of budgetary need.
New York state has an unusual fiscal year, beginning on April 1. That deadline arrived just as the epidemic was approaching its local peak and threatening to overrun downstate hospitals. With lawmakers locked down, the typical closed-door deal-making between the governor and leaders of the two legislative houses, all of whom are Democrats, was truncated and skewed even more heavily than usual in the governor’s favor.
It was obvious that the state would take a big financial blow from the pandemic, but its full scope and duration was – and still is – unknowable. Lawmakers grudgingly ceded to Cuomo the power to make deep cuts in state spending, though “deep” is a relative term in a state whose annual budget is $178 billion. Even a $13 billion shortfall represents less than 10% of planned spending. Countless American businesses would be thrilled to come through this year with a similar revenue reduction.
Still, lawmakers – especially in the New York City-dominated Assembly – cannot abide the thought of spending cuts. Assembly Speaker Carl Heastie called Cuomo’s planned spending reductions of around $10 billion “harmful and devastating to communities across the state.” Lawmakers always describe such cuts as reductions in “services” rather than as efficiencies to be gained by streamlining New York’s byzantine structure of state, county, town, village, city and school district spending. New York’s highest-in-the-nation tax burden is not an accident of nature.
Days before New York’s fiscal year began, Congress passed a major economic relief bill. Among other measures, it loosened federal tax rules for individuals and businesses to take immediate advantage of losses to claim refunds from the Treasury Department. New York, which ordinarily follows federal tax rules, “decoupled” from those changes to avoid taking an extra fiscal hit. The same legislation provided $3 billion to help the state deal with near-term financial impacts. Cuomo was, to put it mildly, not grateful for the help. He railed against what he saw as federal tightfistedness amid some $3 trillion in total pandemic fiscal relief, a figure that is still set to grow.
Cuomo and his budget chief, Robert Mujica, acknowledge that $60 billion represents anticipated shortfalls for years into the future. Yet they want the money upfront, right now – even as the entire country is operating day by day, week by week, just to reopen for business. New York’s less-impacted, remote upstate regions expect to see their first relaxation of the rules next week. For the metropolitan area, business may not reopen to a significant extent until June, or even later.
Sure, $60 billion is a big ask. But this is the state that still boasts the Big Apple as its namesake city. Excelsior may be New York’s motto, but chutzpah is its hallmark.