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Despite early expectations, budget includes tax increase extensions

The new state budget that lawmakers are enacting this week contains a tax package that includes both tax breaks and tax increases. The spending plan comes just two months after Gov. Andrew Cuomo  said there would not be any new taxes in the budget.

On January 22, when Cuomo introduced his budget plan, he said his proposal did not include any new taxes.

“No new taxes in the budget again,” Cuomo said. “That is what is working for us, it has signaled a new day in New  York.

"We don’t need new taxes,” the governor continued. “I think if we went with new taxes this year, we would seriously interrupt the progress  that we have been making.”

Then in mid-March, legislative leaders revealed that they had been talking with the governor about extending an income tax surcharge on millionaires that was scheduled to expire in 2014.  The final spending plan continues the tax on the rich for three more years. It also extends a surcharge on utilities for another year, before phasing it out. That tax is commonly passed on to business and residential customers. 

Beginning in his 2010 campaign for governor, Cuomo has defined extension of an existing tax as a new tax, says E.J. McMahon, with the conservative-leaning think tank the Empire Center.

“By his own standard, he broke his promise,” said McMahon. McMahon says he agrees with Cuomo’s  standard. He says it makes no difference to those who pay the additional taxes whether they are temporary or permanent.

“If you temporarily raise taxes and then extend that temporary increase in taxes, you’ve done a tax increase,” said McMahon. “That’s basically, plain and simple, what you’ve done.”

Ron Deutsch, with New Yorkers for Fiscal Fairness, which advocates for progressive policies, says he was initially fine with Cuomo changing his mind and extending an income tax surcharge on the wealthy.

“We were excited to hear about the news, “said Deutsch. “It was one of those eleventh hour things that was thrown into the budget mix.”

But Deutsch says he was disappointed when he learned that the tax on millionaires would go to finance cuts for small business and to fund rebate checks for middle class families with children earning up to $300,000 a year.  He says the poor, and the elderly are not receiving any aid.

“There are many people who are left out of this,” Deutsch said.

When Governor Cuomo announced the budget compact with the legislature, he explained that he was being consistent with his earlier stance. He says when the tax package is taken as a whole, including the millionaire’s tax and the continuation of a middle class tax break, as well as the other tax breaks in the deal, it represents a “a net tax cut.”

“We are cutting tax rates more than we’re increasing it,” said Cuomo."

Later, when questioned by reporters, the governor stuck to his initial statement.

“Obviously, in the budget some taxes go up, some taxes go down. The question is, what is the net impact,” Cuomo insisted. “We’re talking about tax cuts, not tax increases.”  

Assembly Democrats, who never pledged not to continue the millionaire’s tax, say it’s only fair to ask the wealthy to pay more. Senate Republicans say continuing the extra tax on the rich is justified because it pays for the other tax breaks for small businesses and the middle class.  

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. She has covered state government and politics for the network since 1990.