New York State may come up short of cash as 2011 comes to an end, and the outlook for the 2012 budget has dimmed, according to latest projections. The anticipated shortfalls are renewing attention on Albany’s version of a “millionaire’s tax,” which is set to expire next month.
The state appears to be facing a deficit of $350 million this year between what flows in and what must be spent to keep government running. Gov. Andrew Cuomo’s Budget Division said this week that a drop in tax revenue linked to volatility in financial markets was largely to blame. An expected weak bonus season on Wall Street adds to the grim picture. The budget gap for the next fiscal year, which begins April 1, is estimated to be as much as $3.5 billion.
The so-called millionaire’s tax is actually a surcharge on New Yorkers making $200,000 a year or more. Although the extra tax has brought in about $4 billion a year, many Albany lawmakers and Governor Cuomo oppose its extension. Mr. Cuomo has said the issue is one of fairness and that continuing to tax high-income residents would result in more of them leaving the state. He says there is more room for more spending cuts.
State Assemblyman Fred W. Thiele Jr., who represents the South Fork, has a different idea. He has sponsored a bill that would extend the higher rate on millionaires and use the money to fund rebates to offset property taxes on households earning $250,000 or less. State income tax credits worth about $2.3 billion would be given to taxpayers based on a percentage of their income. The rest of the money raised by the surcharge would go for aid to schools. The idea is attractive in a Robin Hood kind of way, but, given the looming state budget crisis, it would seem to have little chance of passing. Mr. Thiele has said none of the millionaires who live in his district have complained to him about the current surcharge, though.
With deficits likely this year and in 2012-13, Albany should look again at extending the extra tax on the state’s richest residents. Fair or not, it seems necessary.