January 6, 2014. Governor Cuomo in unveiling his tax proposals today has identified a key issue in growing the state’s economy—reducing the property tax burden on New Yorkers, and we agree. The Fiscal Policy Institute has long proposed a circuit breaker as a solution to the burden of high property taxes on moderate and lower income families and to ensure that retirees are not forced out of their homes. What the governor could have added is that creating strong, stable, middle class neighborhoods promotes a better business climate that will create new business opportunities and jobs.
But even the circuit breaker credit for homeowners and the proposed renters’ credit should be provided in a way that does not reduce the amount of state revenue that could be used to make up for the years of cuts and freezes in aid to local governments and public schools. The report of the Governor’s Tax Reform and Fairness Commission shows that it is possible to provide thoughtful tax cuts in a revenue neutral manner.
New York State has lived though five consecutive years of austerity budgets under which those in most need have had to sacrifice. Now the Governor proposes to use the savings from those “bad times” budgets and to implement three additional years of austerity budgeting in order to provide tax breaks that are projected to reduce state revenue by $2 billion a year in 2016-17. That is why the $500-$600 million in estate tax cuts that heavily benefit the very largest estates is so hard to justify, particularly in light of the fact the state is attracting more not less millionaires according to state tax records. The Solomon-McCall Commission also made a compelling case for paying for any corporate tax “reforms” through trimming back some of the $1.7 billion in various business tax breaks that can’t be supported by clear evidcence of their effectiveness.
This austerity approach would place additional pressure on local programs which have already been hit hard—at a time when the needs are high and local reserves have been substantially depleted. Local officials are rightfully calling foul as the state pays for tax cuts at the expense of aid to localities; aid which is needed to provide the infrastructure and the services that are necessary to attract businesses to their communities.
A better way to improve the economic climate of the state would be to:
- Fully fund CFE and ensure that all students get a good solid education.
- Work with localities to set up a program to offer consolidated services, instead of freezing their already stretched budgets.
- Use the Solomon-McCall Commission proposals to reform the tax code in a revenue neutral way, which does not put the burden on the poorest New Yorkers.