ALBANY – Property taxes would be frozen for two years, several million New Yorkers could get income tax breaks to offset property taxes, and relief would come to corporations and the estates of dead millionaires.
Those are among the recommendations from a state commission that likely previews what Gov. Andrew M. Cuomo will propose in his 2014 budget plan next month.
Business groups and some lawmakers hailed the proposals, while left-leaning critics called them unaffordable, ill-targeted toward the wealthy and corporations, and likely to leave less money for public schools.
The proposals would total $2 billion in additional tax breaks three years from now, though state officials could not say how much tax relief might be envisioned for 2014 – an election year for Cuomo and all members of the Legislature and a year when the state is supposed to be facing a near $2 billion deficit.
Cuomo, though, called the proposals affordable, saying he envisions a surplus on the horizon. Half of the $2 billion the commission proposed would be earmarked toward property tax relief. The panel that made the recommendations was co-chaired by former Gov. George E. Pataki and former State Comptroller H. Carl McCall.
“It will reduce the pressure on the homeowners for two years,” Cuomo said of the panel’s call to freeze property taxes in communities that promise to live within the confines of the state’s 2 percent tax cap program and, in the second year, agree to find ways to consolidate and merge services to help cut spending.
The ideas received support from legislative leaders, though with the usual caveats that come with a plan floated more than a month before the governor even proposes his own budget.
Budget-watchers predict that the Democratic-controlled Assembly will not look favorably upon tax cuts for corporations and wealthy families if it comes at the expense of social programs.
And Republicans who co-lead the Senate will need assurances that their higher-income constituents downstate see help in their sky-high property tax bills.
In as diplomatic a statement as can be expected in Albany, Assembly Speaker Sheldon Silver, D-Manhattan, said that any final tax break program “should be premised on a principle of fairness to all New Yorkers” and that resources not be taken from public schools, universal prekindergarten availability and the DREAM Act, which would give state college subsidies to children of undocumented immigrants.
Senate GOP Leader Dean G. Skelos, of Nassau County, said that the proposed tax cuts are fine but that the state needs to adopt a spending cap to help “completely eliminate” corporate taxes on manufacturers statewide and make tax cuts currently on the books permanent.
“We recognize that simply shifting costs from one taxpayer to another would be a missed opportunity,” Skelos said. “It’s time to get to work on a comprehensive tax-cutting and regulatory relief plan for New York.”
While Cuomo did not specifically say he would propose each of the ideas, the commission’s work has been largely seen as giving him what he wants to hear and can politically embrace. The commission plan, just 10 pages long, includes:
• Enacting an income tax credit for homeowners, called a circuit breaker because it would lower the amount that several million people pay on state income taxes if their property tax bill exceeds a certain percentage of their income. While other components of the tax package were spelled out, the circuit-breaker program was left vague so there is no clue at which income levels it might kick in.
• Raising the dollar threshold before a state tax applies to estates – from the present $1 million to $5.2 million – to be consistent with the federal level. At the $1 million level, budget watchdogs say, only about 3 percent of estates are affected each year in New York. The tax rate on estates would also be lowered to 10 percent, from 16 percent.
• Phasing out a tax on utilities, which gets passed along to consumers, that is now due to end in 2018 and would end in 2014 for industrial customers.
The package also calls for cutting the income tax on corporations to 6.5 percent, from 7.1 percent, and to 2.5 percent for upstate companies; the upstate component will cost the state $24 million.
The corporate tax plan “purges” state tax policies that hurt job creation, according to James W. Wetzler, a former state tax commissioner.
Cuomo said he asked the panel to focus first on property taxes, which he described as “a crushing tax.” He also wanted the panel to propose tax cuts to help the economy and to retain and attract businesses.
Pataki, a Republican, who defeated McCall, a Democrat, in the 2002 gubernatorial campaign, said the plan would convince businesses to grow in New York and encourage older people considering flight from the state’s high estate taxes to remain as residents.
A circuit-breaker program would not actually reduce the $50 billion that is collected in property taxes each year in New York, but shift some of the costs from individual homeowners to the state’s general fund, which is paid for by income, sales and other tax collections.
E.J. McMahon, president of the Empire Center for Public Policy, a conservative think tank, wondered how the new property tax programs would work with the $3.5 billion with the School Tax Relief Program, or STAR, already on the books.
“So we’re leaving intact the nation’s largest, state-financed subsidy of property taxes and creating a new one?” McMahon said. “It’s taking every spare dollar they can find and sending it to people whose votes are important, and it’s basically not doing anything to help the state’s economy.”
Groups that make up the Democratic Party’s liberal base in New York condemned several of the panel’s proposals, such as lowering taxes for estates worth more than $5.6 million and the breaks they say would go to corporations that already benefit from tax loopholes.
Michael Kink, executive director of the Strong Economy for All Coalition, whose members include politically potent unions, called the plans “trickle down” economics that left unanswered who might benefit from a property tax circuit-breaker program. His group wants it targeted to lower-income residents and for some of the money the panel earmarks for tax relief to be used for programs such as public education. “The governor is going to need to decide exactly where he stands,” Kink said, adding that the proposals “contain absolutely no guarantee of fairness.”
Other critics say Cuomo should be halting the state’s plan to give $350 rebate checks – coming just weeks before election day next fall – to households with incomes between $40,000 and $300,000 that will cost $1.2 billion over three years.
Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, whose funders include unions, called some of the proposed corporate and estate tax cuts “unconscionable” at a time when child poverty rates in some upstate communities approach 50 percent.
But business groups said tax breaks for corporations and manufacturers are needed, especially upstate. Brian Sampson, executive director of Unshackle Upstate, praised the panel for adopting some of his group’s ideas for lowering business taxes that he said “will ease the tax burden of upstate families and businesses.”
The $2 billion package includes $1 billion in state-funded property tax relief, $381 million in estate tax cuts, $346 million in corporate income breaks, $200 million from hastening the demise of the utility surcharge, $136 million manufacturers real property tax relief and $24 million for upstate tax breaks.