Gov. Andrew Cuomo will unveil his state budget proposal on Tuesday, a spending plan that is likely to call for big changes to state taxes in response to the federal tax overhaul.
The Democrat will release the roughly $150 million spending plan as he heads into an election year, in which he hopes for a strong win to allow him to run for president in two years. He and lawmakers hope to pass a budget by April 1, and they’ll have no shortage of tough decisions.
The state faces a projected $4 billion budget deficit thanks in part to weaker than expected tax returns. Recent decisions by Washington Republicans to reduce spending on some health care programs will cost the state another $2 billion in lost revenue.
Then there are taxes, a politically charged topic in any year, let alone in an election year for Cuomo and every lawmaker. Cuomo has floated the idea of big changes to the state’s tax code, including a new tax on certain investment income and a payroll tax, which could be used to replace some or all of the state’s income tax. Payroll taxes are similar to income taxes except that employers pay a portion of the tax.
“It’s not going to be easy, it is going to be complicated, but I believe working together, we will get it done,” Cuomo said during his state of the state address earlier this month.
Some type of tax shift is needed, Cuomo argues, to soften the blow of the federal tax overhaul, which caps at $10,000 a deduction for state and local taxes. That deduction has been especially popular in high-tax states like New York, meaning many homeowners will see significant tax increases under the new federal tax code.
Republicans are wary of Cuomo’s talk of big tax changes, with Senate Leader John Flanagan announcing his opposition days before Cuomo delivers the plan.
Lawmakers are also skeptical of Cuomo’s promise to balance the budget — without big spending increases — while still funding many of the pricey proposals he laid out in his state of the state, which include upgrades to airports, big investments in economic development and increases in spending on education and workforce development.
“Boy was it ambitious,” Flanagan told reporters.