Major budget issues still unresolved

Mar 22, 2018

It’s just over a week until the state budget is due, and there’s no resolution on an array of proposed new taxes and spending proposals, as well as several unrelated items that are tied to the budget.


Credit WBFO file photo

Gov. Andrew Cuomo has been holding private leaders meetings on the budget at the executive mansion.

“This week is about getting a state budget done,” Cuomo said, “which is one of the most serious state budgets we’ve had to deal with.”

But he took a day off to give several storm briefings in New York City and its suburbs, where more than a foot of snow was expected.

Among the unresolved items — how to mitigate the partial loss of state and local tax deductions in the federal tax law approved by Congress and signed by President Donald Trump late last year.

David Friedfel, with the budget watchdog group Citizens Budget Commission, said it’s something that needs to be dealt with. He said New York could lose billions of dollars in revenue and some of the state’s wealthiest residents, who might choose to switch their primary residence to lower-tax states.

“This is a significant issue for New York, and it could be a real problem long term,” Friedfel said. 

Cuomo has proposed an optional payroll tax for businesses that employers and their workers could substitute for the state income tax. The business owner could then deduct the payroll tax from the companies’ taxes, which is still allowed under the changes to the federal tax code.

He also wants to set up charitable entities for schools and health care. Taxpayers could donate to the funds as a substitute for paying a portion of their property taxes. They would then receive a charitable donation tax credit on their federal tax forms. 

Friedfel said both are good fixes, but are not without complications, including whether the IRS will allow the charitable funds as, essentially, a substitute for state and local tax payments. 

The state Assembly, where Democrats are in the majority, is on board with the governor’s proposals. But the state Senate, where Republicans lead, has not agreed to them.

Cuomo also has proposed a tax on opioid prescription pain medicines that could bring in $125 million to help offset the cost of treating addiction to the drugs. The governor said it’s only fair that the makers of the pills bear some of the financial burden of treating people who became addicted.

But many, including the pharmaceutical industry, say patients will end up paying the cost. The lobbying group Pharmaceutical Research and Manufacturers of America, or PhRMA, commissioned a study that found the tax would actually lead to higher insurance and medical costs for New Yorkers. 

Union College economic professor Lewis Davis conducted the study, along with a colleague.

“It will raise money, but they are going to be raising money from New Yorkers in the form of higher insurance payments,” Davis said. “It’s no different than any other tax.”

Some of the drugs given to patents in addiction treatment clinics also would be taxed and would become more expensive. That might encourage more to switch the cheaper alternative of black market heroin, Davis said.

There are a number of nonspending items tied to the budget, including the Child Victims Act, to give victims of childhood sexual abuse greater access to the courts, and the Dream Act, which would qualify children of undocumented immigrants for college aid.

Governors and legislators often struggle to meet the budget deadline, which is March 31. This year, it may be even harder, because the Passover and Easter holidays begin on March 30.

Late in the day, legislative leaders announced what's known as “table targets,” the amounts both houses have agreed to add to the governor's budget. A total of $400 million will be distributed to various parts of the budget, including $70 million more for education, and an additional $70 million for health care programs.