New York’s $212B Budget Includes Rent Relief, Tax Hikes for Top Earners
The state's budget limited funding to Cuomo's Penn Station redevelopment, which includes Vornado's Penn 15 skyscraper
It might be a week late, but state leaders reached a deal Tuesday night on a $212 billion budget that hiked taxes on the wealthiest New Yorkers, while providing financial relief to tenants, immigrants and business owners struggling through a global pandemic.
The agreement, which is nearly 20 percent higher than last year’s $177 billion budget, marks a milestone for Democratic lawmakers who won control of the state Senate in 2018 and repeatedly clashed with Gov. Andrew Cuomo over taxes, housing policy, and state and local aid.
State Assembly members were still voting on the budget bills as of Wednesday afternoon, after the Senate passed all 10 proposals by 4 a.m., but the governor is expected to sign it once it passes.
It could have been much worse.
The state was staring down the possibility of a $15 billion budget deficit in January, due to declining revenues and costs incurred from the spread of coronavirus. Cuomo proposed an array of tax increases, and cuts to schools and Medicaid, if the state didn’t receive federal aid. But the state’s tax receipts were about $1.7 billion higher than anticipated, and Congress came through with a $1.9 trillion COVID-19 relief bill that flowed roughly $12.7 billion into the state’s coffers.
Once a gaping budget gap was no longer a fiscal reality, progressive legislators pressed for tax increases and relief for New York state residents whose lives have been upended by the pandemic.
Democratic leaders also exerted leverage over the governor, who typically has the constitutional power to craft and pass the state’s annual spending plan, thanks to veto-proof majorities they enjoyed after the 2020 elections and several sexual misconduct scandals that could be grounds for his impeachment. Last month, they even curtailed Cuomo’s COVID-19 emergency powers that they granted the previous year.
Still, Cuomo was able to insert provisions that boosted capital spending for the redevelopment around Penn Station and legalized online sports betting. On Wednesday, he called the agreement “the most robust, most impactful, most important budget that we have done in this state, I believe, in modern history.”
New York’s millionaires aren’t going to like what they see in their tax returns next year.
Under the new budget, the state will hike income tax rates for single filers earning more than $1 million from 8.82 percent to 9.65 percent. Those hauling in between $5 million and $25 million would be taxed at a rate of 10.3 percent, and those receiving a salary of $25 million or more would have their earnings taxed at 10.9 percent.
The city’s highest-earning residents, who also pay local taxes, could see their rates climb to between 13.5 percent and 14.8 percent. The rates expire by 2027.
“We are asking people who have been doing the absolute best in our economy to give us slightly more in tax revenue,” said Manhattan Sen. Liz Krueger, who chairs the Senate Finance Committee, according to Politico. “It won’t hurt them; they’ve already seen a significant cut in their taxes during the Trump administration.”
The governor, who has long-opposed income tax increases, tried to spin the new rates as insubstantial, because Congress could repeal a state and local tax (SALT) cap later this year that could lower property taxes for suburban homeowners.
“So they say, ‘You raised taxes?’ No,” Cuomo said. “After SALT, taxes will be lower than they were before.”
But conservatives argued that higher income taxes could convince New Yorkers to continue to relocate to lower-taxed states like Florida and Connecticut.
“The only thing this budget accomplishes is the accelerated decline of our state,” Nick Langworthy, chairman of the New York State Republican Party, said in a statement. “It’s a $212 billion dollar tax-and-spend boondoggle that will push New York’s mass exodus to the point of no return.”
One program the new tax revenues would be supporting is a $2.4 billion emergency relief fund for tenants.
The rental assistance fund would be available for tenants, regardless of their immigration status, who can show they endured financial hardship over the past 12 months, such as the loss of a job or steady income.
The funds would coincide with the state’s eviction moratorium, which is set to expire in May.
“People have to be able to pay their rent, people have to be able to have a stable home,” Cuomo said. “We’ve had eviction moratoriums, but now we want to repair the economics. Rent has to be paid, but tenants need the assistance to pay their rent, and landlords have to pay their taxes and their heat bill.”
The budget also includes $120 million for homeless housing initiatives, which could be created through the conversion of vacant hotels and office space, as well as new investments in public housing and transitional rent supplemental programs.
Small businesses decimated by the economic downturn and coronavirus lockdowns will have an opportunity to tap into $800 million in grants and $200 million in tax credits.
The provisions also include a number of recovery grants for arts and cultural organizations, live theaters, and restaurants seeking to reopen after more than a year of being closed to the public.
The governor celebrated the reopening of Moynihan Train Hall to much fanfare in December, but it was only one of several development projects surrounding Penn Station he hoped to spearhead.
The most controversial one might be a 1,200-foot tower that developer Vornado Realty Trust (VNO) named PENN 15 and is nearly as tall as the Empire State Building. Several public officials, including Congress members Jerrold Nadler and Carolyn Maloney, asked Cuomo to delay the project until city stakeholders have a say in its future development.
Lawmakers authorized a $1.3 billion loan in the state budget to revamp the Penn Station complex, but limited the use of the funds to “furtherance of [expanding Penn Station] or other transportation improvement projects and not for above-grade development.”
But several Assembly members voted against the budget bill anyway.
“It’s decided,” Manhattan Democratic Assemblywoman Yuh-Line Niou tweeted. “Only $200 million for our public housing is unacceptable when $1.3 billion dollars goes to Cuomo’s PENN15. I will be voting no.”