Gov. Andrew Cuomo doesn’t want to increase taxes on the rich — but vowed to do so Tuesday if the Biden administration doesn’t deliver $15 billion in aid to pandemic-slammed New York.

Cuomo and his budget director spent most of the time in their briefings with the press detailing what a bad move they believed an increase levied on New York’s wealthiest would be.

“You raise taxes, people decide they don’t want to live here and those numbers (from income taxes) go down,” Budget Director Robert Mujica told reporters after Cuomo unveiled his $193 billion executive budget. “If we have the federal money, there isn’t a need to raise those taxes.”

Cuomo’s move, the first time he has endorsed higher taxes, reframes the debate over further taxing the rich

The debate had been a faceoff between business groups that contend higher income taxes will lead to an exodus of wealthy taxpayers and progressive groups that argue upping taxes on the rich is preferable to any budget cuts — with the governor on the side of no tax hike.

Now a tax increase along the lines of one that has widespread support in both the state Assembly and Senate seems assured if federal aid is insufficient. But if Washington meets the $15 billion bar set by Cuomo, the Legislature would face pressure to scrap talk of higher taxes. 

Current Budget Gap Shrinks

The Cuomo administration Tuesday conceded for the first time it has the resources to close the gap in the current year budget with virtually no cuts. Once projected as high as $8 billion, larger-than-expected revenues have whittled the amount to $4.7 billion. 

Added money from the federal government for schools, emergency COVID aid as well as savings from a hiring freeze and delayed pay raises have essentially eliminated the gap.

Local governments and nonprofits that saw 20% of their expected payments from the state withheld will now be getting most of the money, sans a cut of 5%.

The expected budget gap for the next fiscal year has been downsized as well, to about $10 billion. 

To deal with the hole, the governor gave the legislature two budgets: a worst-case plan that includes $6 billion in federal aid from the new Biden plan that proposed $350 billion in money for states and localities and a best case scenario that counts on $15 billion from Washington.

If the state only gets $6 billion, a balanced budget would require a jump in the income tax rate on taxpayers making more than $5 million to over 10% to generate $1.5 billion a year. Middle-class income tax cuts already approved would be rescinded.

Local aid and Medicaid would face budget reductions from projected spending of some $3 billion.

With $15 billion in federal aid, no tax increases would be necessary, the governor said. Local assistance would be kept at current levels and education aid would be increased.

State Sen. Julia Salazar (D-Brooklyn) Credit: Ben Fractenberg/THE CITY

Cuomo, meanwhile, endorsed a federal tax increase on the wealthy, which did not satisfy progressive groups.

Legislators who call themselves democratic socialists, most notably Sen. Julia Salazar (D-Brooklyn), issued a statement slamming Cuomo and Mujica — and reiterating a call for $50 billion in tax increases, about a quarter more than the state gets in taxes and federal aid.

“What we heard from the governor’s Republican budget director today proves once again how out of touch this administration is,” they said. “Before COVID-19, New York was the most unequal state in the country with extraordinary child poverty rates and the highest homelessness rates in the country. We’re fighting to tax the rich to not only to shore up our state’s short-term finances, but to enact long-term, structural solutions to our rampant inequality as well as the chronic underfunding of New York’s public services.”

Could Be Highest Rate in U.S. 

The legislative consensus on raising taxes for those making more than $5 million, would up the combined rate for taxpayers living in New York City from 12.7% to 14.7% — becoming the highest in the nation

The second highest rate in the country would be California at 13%. And while New Jersey boosted its tax on high earners to 10.75%, that would still be nearly 4 percentage points less than New York.

The 188,000 taxpayers who make up the top 2% of all New Yorkers pay half of all the income tax collected. The top 5% pay a little more than 60% combined. 

The governor added the adjective “only” to his power point presentation on the potential $1.5 billion revenue to be gained by a tax hike.

Mujica noted the various statistics on mail forwarding and moving data that suggested an exodus from the wealthier parts of Manhattan during the pandemic.  

“We want to give all those people who have left New York a reason to come back,” he said.

‘Less Harmful Measures’

Business leaders quickly reiterated their opposition to the tax hike.

“An increase in the personal income tax for high earners will drive them out of the state and not raise any substantial revenues,” said Kathryn Wylde, president of the Partnership for New York City.

The Citizens Budget Commission argued there are many other steps the state could take before needed to increase taxes.

“The state should adopt other less harmful measures,” said CBC President Andrew Rein. “These include reducing aid to wealthy school districts, eliminating wasteful economic development spending, and shifting cash spending on capital projects to debt.”

The governor’s budget speech included a passionate plea for Washington to restore unlimited deductions for state and local taxes, a move that would cushion any tax increase that was passed. 

“They took from New York and gave to Republican states,” Cuomo said. “It’s very costly to New Yorkers. Repealing it, New Yorkers would get back $12.3 billion every year.”