For years, progressive Democrats in Albany have been pushing a three-word solution to many of New York’s problems: Tax the rich.
Yet year after year, proposals to make the wealthy pay more were blocked by Republicans.
Now, however, their most staunch opponent may well be the state’s third-term governor, Andrew M. Cuomo, a socially progressive Democrat who often boasts of his history of tax cuts.
That approach appeals to most taxpayers, and is easier to understand during a decade of financial growth. But as the coronavirus pandemic has transformed New York’s financial problems from merely troubling to catastrophic, a growing contingent of Democrats in the all-blue Legislature is pushing the governor to reconsider his stance.
They say the state must increase taxes on the wealthy to safeguard services for New York’s neediest, which could be decimated if the state were forced to make broad cuts because of the looming deficit.
“We are playing with fire: These are people’s lives,” said State Senator Alessandra Biaggi, a Democrat representing parts of the Bronx and Westchester County who is co-sponsoring a bill to tax the ultrawealthy. “It is not OK to not act.”
The fiscal hole is daunting: The state faces a $14.5 billion budget gap this fiscal year, according to budget officials.
Mr. Cuomo, however, says the potential benefit of new revenue from taxing the rich would be far outstripped by the negative impact on the state’s highest earners, who already shoulder the bulk of the state’s taxes.
“I don’t care what you increase taxes to, you couldn’t make up that deficit,” Mr. Cuomo said last week upon releasing a letter asking congressional leaders for a whopping $59 billion to cover two years of projected state deficits and more.
“There is no combination of savings, efficiencies, tax increases that could ever come near covering the deficit,” he added. “We need the federal government to assist in doing that.”
But supporters have framed the tax increases as an alternative to the steep cuts to local governments and schools that Mr. Cuomo has threatened to implement if Congress fails to approve a federal stimulus package to cover the shortfall.
Raising taxes on the wealthy has long had the backing of the Assembly and its speaker, Carl E. Heastie, and it recently gained the endorsement of the Senate majority leader, Andrea Stewart-Cousins, bestowing the effort renewed political momentum.
In late July, Ms. Stewart-Cousins cited the coronavirus crisis in throwing her support behind taxing “multimillionaires and billionaires to help our state shoulder this extraordinary burden.”
Her statement was an encouraging sign for the left-wing activists, unions and more than 100 Democratic lawmakers who have indicated they support raising taxes on the wealthy to lessen the blow of budget cuts.
“At some point, the waiting game with Washington will run its course,” said Michael N. Gianaris, a state senator from Queens and the deputy majority leader. “And I think we’re just about there.”
While Mr. Cuomo and others have been pleading for help, it seems unlikely that any deal in Washington will make the state completely whole.
The negotiations between Senator Mitch McConnell of Kentucky, the Republican majority leader, and his Democratic counterpart, Senator Chuck Schumer of New York, have been slow-moving, with most expecting only a slimmed-down version of an aid package to pass.
On Thursday, Mr. Schumer sent a letter to his Democratic colleagues, saying Mr. McConnell and the White House “may cut their original, inadequate, $1 trillion ‘skinny’ bill in half,” with “no money for state and local services.”
Barring generous federal assistance, state budget officials say that there are really only three ways out of the current crisis: taxing, cutting or borrowing. The state has already resorted to the latter, taking on $4.5 billion in short-term loans, due to be paid back at the end of the year.
Mr. Cuomo’s budget officials have already begun to reduce spending in case federal lawmakers and the Trump administration fail to agree on additional aid for states.
State officials have withheld about $1.9 billion in payments to localities, school districts and nonprofits, affecting providers of mental health and substance abuse services and creating financial uncertainty for schools on the brink of reopening.
Robert Mujica, the governor’s budget director, said officials were still deciphering how much money they would withhold from a large $3 billion payment to schools in September, noting officials would be careful not to disproportionately cut funding from poorer school districts.
But he warned that the withheld payments — allowed under extraordinary emergency powers the Legislature granted the governor earlier this year — could become permanent cuts if federal aid does not come through.
In total, budget officials said they’re on track to cut up to $8 billion in local aid.
Fearful of the cuts becoming permanent, progressive lawmakers and advocates are pushing for a slew of revenue-raising bills — from increasing the tax rate on millionaires to a tax on pieds-à-terre — that could lead to a bitter standoff between Mr. Cuomo and his party if the Legislature moves to vote on the measures.
“We could be generating billions and billions of dollars to prevent many of these cuts that are being proposed and are happening right now,” Ron Deutsch, the executive director of the Fiscal Policy Institute, a left-leaning think tank, said during a news conference last week. “The governor should be talking more about shared sacrifice right now than just talking about protecting the wealthiest among us.”
The Coronavirus Outbreak ›
Frequently Asked Questions
Updated September 4, 2020
What are the symptoms of coronavirus?
- In the beginning, the coronavirus seemed like it was primarily a respiratory illness — many patients had fever and chills, were weak and tired, and coughed a lot, though some people don’t show many symptoms at all. Those who seemed sickest had pneumonia or acute respiratory distress syndrome and received supplemental oxygen. By now, doctors have identified many more symptoms and syndromes. In April, the C.D.C. added to the list of early signs sore throat, fever, chills and muscle aches. Gastrointestinal upset, such as diarrhea and nausea, has also been observed. Another telltale sign of infection may be a sudden, profound diminution of one’s sense of smell and taste. Teenagers and young adults in some cases have developed painful red and purple lesions on their fingers and toes — nicknamed “Covid toe” — but few other serious symptoms.
Why is it safer to spend time together outside?
- Outdoor gatherings lower risk because wind disperses viral droplets, and sunlight can kill some of the virus. Open spaces prevent the virus from building up in concentrated amounts and being inhaled, which can happen when infected people exhale in a confined space for long stretches of time, said Dr. Julian W. Tang, a virologist at the University of Leicester.
Why does standing six feet away from others help?
- The coronavirus spreads primarily through droplets from your mouth and nose, especially when you cough or sneeze. The C.D.C., one of the organizations using that measure, bases its recommendation of six feet on the idea that most large droplets that people expel when they cough or sneeze will fall to the ground within six feet. But six feet has never been a magic number that guarantees complete protection. Sneezes, for instance, can launch droplets a lot farther than six feet, according to a recent study. It’s a rule of thumb: You should be safest standing six feet apart outside, especially when it’s windy. But keep a mask on at all times, even when you think you’re far enough apart.
I have antibodies. Am I now immune?
- As of right now, that seems likely, for at least several months. There have been frightening accounts of people suffering what seems to be a second bout of Covid-19. But experts say these patients may have a drawn-out course of infection, with the virus taking a slow toll weeks to months after initial exposure. People infected with the coronavirus typically produce immune molecules called antibodies, which are protective proteins made in response to an infection. These antibodies may last in the body only two to three months, which may seem worrisome, but that’s perfectly normal after an acute infection subsides, said Dr. Michael Mina, an immunologist at Harvard University. It may be possible to get the coronavirus again, but it’s highly unlikely that it would be possible in a short window of time from initial infection or make people sicker the second time.
What are my rights if I am worried about going back to work?
One Democratic proposal meant to raise revenue for education would increase the tax rate on millionaires to 9.62 percent for those who make up to $5 million, and up to 11.85 percent for those who earn more than $100 million. The current tax rate for people earning more than $1 million a year is 8.82 percent.
But among the most ambitious and contentious proposals is a so-called billionaire’s tax, which would tax the unrealized capital gains of New York’s nearly 120 billionaires and redirect the proceeds to workers not eligible for unemployment insurance or the federal stimulus.
The tax would be the first of its kind in the nation, although the idea has been floated in Congress and California. It’s common to tax the profit, or realized capital gain, a person makes when they sell off an asset, such as a stock. But it’s almost unheard-of to tax the unrealized capital gains, or the appreciation of assets not yet sold.
Emmanuel Saez, an economist whose research on income inequality has helped fuel support for a wealth tax among the left flank of the Democratic Party, estimated the tax could raise more than $5 billion a year, on average, and about $23 billion the first year it goes into effect.
Mr. Saez, who helped New York lawmakers draft the proposal, said billionaires would find it hard to avoid the tax because it would go into effect immediately, leaving them with no time to move out.
“If that bill was to pass tomorrow, even if you’re a billionaire and you decide ‘I’m leaving,’ you would still be liable on all your unrealized gains because you would still be a 2020 New York resident,” said Mr. Saez, who teaches at the University of California, Berkeley.
But the tax could prove highly complex to administer and potentially unconstitutional, according to its critics, including Mr. Mujica.
Edmund J. McMahon, a senior fellow and founder of the conservative-leaning Empire Center, dismissed the proposal as “a political totem,” and questioned the wisdom of creating a new tax after many New York homeowners lost a tax write-off when President Trump instituted a so-called SALT cap that limited the deduction that could be claimed.
“Is it practical to think you can do that without harming your tax base at a time when a large number of those people are reconsidering their presence in New York and they don’t have a tax deduction anymore?” he said.
The crisis has also given fresh oxygen to ideas like activating the state’s stock transfer tax. The tax, which dates to 1905, charges a small fee on most sales of stock in New York, though the state currently refunds the entirety of that amount, a policy that began in the 1980s.
Mr. Mujica, who previously worked for Republicans when they led the State Senate, also expressed concern that wealthy residents could flee New York for low- or no-tax states rather than endure a tax hike.
Currently, the top 2 percent of the state’s highest earners pay about half of the state’s income taxes.
“The administration is very comfortable with our progressive tax structure,” he said in an interview last week. “The question is, how much more can you push it, and more than any other state in the country, before it becomes a negative on the economy if people decide that taxes in New York are too high?”