Governor Andrew Cuomo, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie have agreed on a $212 billion state budget after almost a weeklong impasse. The final budget includes:
- $29.5 billion in aid to schools
- $29 billion in public and private green economy investments;
- $2.4 billion for rent and homeowner relief
- $2.4 billion for childcare
- $2.1 billion for excluded workers
- 1 billion for small business recovery
- A plan to make broadband internet affordable
- Legalizing mobile sports betting (combined with the previously legalized marijuana will create new revenue streams once fully up and running)
- Implementing comprehensive nursing home reforms
- $285 million in infrastructure
The Enacted Budget closes the deficit and invests in the ongoing response to the pandemic and recovery efforts. In addition to the school aid portion, the budget agreement includes spending in the following categories:
- Total State Operating Funds: $111 billion
- All Funds spending $212 billion
Between better-than-expected sales tax revenue combined with federal stimulus, the State had much more cash than originally anticipated. Yet, a major piece of the budget legislation includes raising taxes on the wealthy. Tax rates will increase on individuals making over $1 million per year and joint filers making over $2 million. Also, two new brackets will be introduced for incomes over $5 million and $25 million. The changes mean New York City’s wealthy residents would be subject to the highest combined local and state personal income tax rates in the US. The corporate franchise tax rate would also increase to 7.25 percent from 6.5 percent, but it is supposed to remain unchanged for small businesses. The new tax hikes on the rich and increases to corporate taxes are expected to generate over $4 billion in additional revenue each year and are expected to affect about 50,000 taxpayers. There are sunset provisions in the new tax hikes, with the income tax rates and corporate franchise rate set to expire in 2027 and 2023, respectively.
The big question moving forward is, will this force wealthy New Yorkers to leave in droves? When discussing raising taxes on the wealthy this was more of an idle threat than a practical one. New York was a place that the wealthy could enjoy to the fullest and crucially, where employees wanted to be. However, the shift to remote work brought on by the Covid-19 pandemic has changed that calculation. Wealthy individuals, as well as large corporations, see the benefit of work from anywhere models, and crucially, so do employees. Many of the advocates of tax increases on the wealthy note how much the wealthy prospered during the pandemic. This is true and it is fair to feel uneasy about that. At the same time, it is true that if people can increase their wealth from working remotely, they are far more likely to do so and escape a climate that they consider to be hostile.
New York State just legalized online sports betting but the biggest gamble they took is with their new taxes.