Idle question: What do you call a tax break that a governor announces 10 months before his quadrennial appointment with voters, but that doesn’t take effect for another two years?
Impertinent answer: A useful gimmick.
OK, maybe not exactly a gimmick. After all, the tax breaks that Gov. Andrew M. Cuomo announced Monday are real enough, if not overly generous. But they are based on a budget surplus that is anticipated two years from now, which is when the cuts will be fully implemented. So why announce it now? Because this is an election year.
The governor and all state legislators face the voters this November, and while Cuomo seems in good enough shape to withstand a Republican challenge and legislators’ districts have been gerrymandered into virtual invulnerability, they still love bathing their constituents in legal tender.
In fact, this year’s economic lovefest began in 2013, when lawmakers and the governor cheerfully approved a tax rebate for families with children. But there was an asterisk: The checks won’t show up in voters’ mailboxes until just before Election Day this year. That’s called conditional love.
The newly announced tax breaks are divided into categories for homeowners and businesses. The former will benefit from a tax freeze and, later, from a circuit breaker program that will reduce the tax burden for lower- and middle-income property owners. Cuomo says that, when fully implemented, the reduction will save property owners an average of $350, but E.J. McMahon, president of the conservative Empire Center for New York State Policy, dismisses it as an all-but-worthless $60 for average homeowners in Erie and Niagara counties.
One interesting, and worthwhile, aspect of the homeowner tax breaks is that they will be offered only to residents of localities that live within the state’s 2 percent property tax cap program, enacted at Cuomo’s insistence during his first year in office. If localities exceed the cap, their elected officials will be left to explain to their constituents why they were cheated out of the rebate, whatever its value turns out to be. It’s a fair condition; without it, municipalities would be tempted to simply increase spending even more, with the state covering part of the cost.
For businesses, Cuomo is following the recommendation of his bipartisan tax-cutting panel by cutting the corporate income tax on upstate manufacturers to zero and decreasing the state income tax rate to 6.5 percent from 7.1 percent. In addition, an assessment on utility bills, which is scheduled to be eliminated in 2018, would end this year.
Even though the timing of the tax cuts is clearly and undeniably political, they are still worth pursuing. Nevertheless, the hard fact is that the state is nibbling around the edges of this problem. New York is the nation’s highest-taxed state because of its cost structure. That’s the issue. Providing rebates to taxpayers, no matter how welcome, does nothing to reduce those costs. The approach merely requires residents to pay out of a different pocket. It provides a degree of relief, no doubt, but it does so by disguising the costs rather than reducing them.
That’s why Cuomo – and whoever wins the governor’s seat this November – has to focus on the big costs, including pensions and Medicaid. Other factors driving up spending in New York include the Taylor Law, which increases the costs of public labor contracts; the Triborough Amendment, which provides public unions a disincentive to negotiate, and the Scaffold Law, which raises the cost of virtually all construction in New York by pricing insurance far above the premiums paid in other states.
So while New Yorkers may welcome any form of relief, the key to keeping business and residents in New York is lowering the costs of living here. That work remains, even after the checks arrive.