December 21, 2020
New York, like every other state, relies on tax revenue to provide stable funding for necessary public services. The COVID-19 pandemic has been particularly damaging to the state and local governments’ budgets as the necessary mitigation measures have continued to curtail business activity, which in turn depressed tax revenues. Among the most impacted industries are hospitality, tourism, and leisure sectors that employ many low-skilled and immigrant workers.
When many workers permanently lose their jobs, the impact is both local and statewide. As people start having difficulties paying for essentials locally, their families suffer, and the whole community is affected by income loss. Simultaneously, decreased state revenue jeopardizes funding to support the essential public services that keep our communities strong and healthy, including schools, hospitals, and supportive services.
Keeping money flowing through local communities means a faster recovery for all. The state has several options to explore to cope with this historic revenue shortfall. Naturally, the federal government’s role would be to lead the necessary remedial economic actions. Sensible borrowing is also a viable option, as well as looking to increase tax revenue wherever possible. The Center on Budget and Policy Priorities offers an overview of ways that states can raise revenue.
The Fiscal Policy Institute’s estimate in the table below details how the proposed “ultra-millionaires’ tax” proposals could be updated for higher revenue yield. The state’s revenue can be responsibly stabilized, during a two-speed recovery, by relying on the wealthier taxpayers whose incomes grew or contracted negligibly.
As Congress continues debating how to best provide federal economic relief, the last of the CARES Act federal benefits are set to expire in December. Raising revenue at the state level seems to be worthy of discussion for legislative leaders Senate Majority Leader Andrea Stewart-Cousins and Speaker Carl E. Heastie, who also stated that he was ready to raise taxes before the end of the year if necessary.