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NEW YORK STATE

Subsidies and taxes get attention as NY state budget season looms

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Gov. Kathy Hochul speaks during a ceremony on Oct. 8. 

ALBANY — As Gov. Kathy Hochul's administration assembles a proposed state budget, progressive activists who favor higher taxes on wealthy New Yorkers are aiming at a new target: corporate subsidies doled out under the guise of economic development.

"I think you can be pro-business and not be pro-corruption," said Michael Kink, the executive director of the labor-backed Strong Economy for All, a group that waged a successful push this year for increasing the taxes on the state's top income earners.

Going back to the same old well — taxing the rich — is not in the cards for 2022 as the state's finances have enjoyed a robust recovery this year, coming just one year after New York's fiscal health took a beating amid pandemic-related shutdowns.

Tax revenue collections surged this year, with the state garnering $7.2 billion more than what had been anticipated through September, according to the latest monthly cash report issued by Comptroller Thomas DiNapoli.

“This provides an excellent opportunity to improve the state’s long-term fiscal standing by using surplus revenues to bolster rainy-day fund reserves and fund critical infrastructure projects instead of issuing debt," DiNapoli said.

The tax increases aimed at wealthy New Yorkers were a factor in helping the revenue flow, as was the jackpot of federal COVID relief funds sent to the state government. Many local city, town and county governments are also brimming with cash as a result of the federal payments.

Kink argued the way economic grants have been parceled out have often not lived up to advance billing in terms of job production and benefits for local communities.

"The Cuomo administration used so-called economic development grants as giveaways to their campaign contributors," he said. "Gov. Kathy Hochul needs to end that process."

Kink's criticisms of the economic incentives were disputed by Ken Pokalsky, vice president of the Business Council of New York State.

"We challenge the assertion of systemic mismatch between state incentives, investments, and jobs," Pokalsky said. "In fact, over the past decade, the state’s key economic development programs have been updated to assure more certain economic returns on the state’s investments.

Hochul signaled this week that she is ruling out any calls for tax hikes, though she has not laid out a detailed plan for how she hopes to accomplish economic development objectives.

The governor suggested higher taxes on the rich — branded by some as the millionaires' tax — could chase those paying the higher rates to relocate to Florida, and "that does not help us."

At a time when she is beckoning business executives to relocate to New York, Hochul told City and State, an online publication: “Raising taxes right now will not accomplish that.”

Kink said a coalition of "strange bedfellows," with both progressive activists and Republicans in the mix, could emerge to push for dramatic changes to the state's economic development programs.

"I think we are going to be working to move the corporate giveaways into public investments that benefit everyone," he said. "There are a lot of conservative Republicans who would like to see that kind of reform."

The Legislature approved a record-high $212 billion budget in April. The ranking GOP member on the Senate Finance Committee, Sen. Tom O'Mara, R-Big Flats, said in his weekly commentary issued Friday that the sum was "irresponsible."

O'Mara also noted the budget provided $2 billion in funding for payments to undocumented immigrants who had been excluded from federal stimulus payments, money, he said, that should have been channeled to communities recovering from pandemic impacts.

Meanwhile, he noted, some Democrats are calling for higher energy taxes by way of the "Climate and Community Investment Act" legislation that would raise gasoline taxes and home heating fuels.

"The ongoing implementation of these regressive taxes would leave lower- and middle-income families and workers, motorists, truckers, farmers, manufacturers and other industries, and seniors among the hardest hit," O'Mara said.

Ashley Ranslow, assistant state director for the New York office of the National Federation of Independent Business, told CNHI that small businesses would suffer if Albany imposes higher taxes on them, especially since they are now facing much higher costs for unemployment insurance due to the state fund for jobless benefits being depleted.

Ranslow said NFIB is pressing state leaders to shift a portion of the federal stimulus money sent to state government to the unemployment insurance trust fund. "The trust fund is completely insolvent," she said.

"If you want a strong economy and want to support small businesses, the best thing to do is to have lower taxes, less regulation and fewer labor mandates," Ranslow said.

She also said it would be appropriate to scrutinize the effectiveness of economic development spending, particularly the state's $450 million film tax credit program, designed to lure film and television productions to New York.

"Why are we giving massive amounts of tax subsidies to Hollywood?" she asked.

The film tax credits have been defended by Empire State Development, the state authority that administers the program.

DiNapoli's snapshot of state finances showed personal income tax collections, as of September, exceeded estimates issued in May by $4.8 billion.

Business taxes collected by the state totaled $5.9 billion. That amount exceeds the sum collected by the same point the previous year by $1.9 billion.

Hochul is expected to present her proposed budget in January. The current state fiscal year ends March 31.

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