F.A.Q.: How did Andrew Cuomo hike tax revenues by cutting taxes?
A conversation with Times Union political reporter Jimmy Vielkind about Andrew Cuomo's fast-tracked tax plan.
Josh Benson: Putting aside for now the way in which Cuomo's tax package got passed, what do you think of it, substantively? Which interests won?
Jimmy Vielkind: I actually think most everyone can claim partial victory.
Unions like 1199 and the U.F.T. that pushed for more money to fund education and health care will get almost $2 billion toward bridging next year's budget deficit, which books 4 percent increases in spending to both of their topical areas. Business groups on Long Island see a reduction in the M.T.A. payroll tax. Lawmakers get to claim they cut taxes for people like you and me, Josh. And Cuomo gets to claim he's reasonable, the Solomonic Centrist who Gets. Stuff. Done.
Josh: He certainly does! The way this deal got done is about as far from Cuomo's stated ideal of transparency as it's possible to be. It makes a mockery of that particular pledge, actually.
But it happened fast. If the governor's calculation here was that the press and some legislators would scream about the lack of deliberation but that the public wouldn't care at all about the process angle, was he wrong? I mean, I ask this with an appropriately heavy heart and all, but have you seen any polls indicating that what people really want from Albany is more deliberation?
Jimmy: No. Our hearts can weigh heavy, but the polls won't capture it.
What people at home will see are a slight decrease in their taxes. They'll see reports of a federal government on the verge of shutdown. They'll see their stock portfolios suffer as the federal credit rating is downgraded. And then for once, after years of seeing their state government stalemated, they see ... stuff getting done.
This will have an appeal that goes beyond average voters. Several power players have mentioned this to me. Business leaders say they support Cuomo because he's a steady hand. The U.F.T.'s Mike Mulgrew said people were "jealous" of what's happening in New York.
We also see legislators coming around to the idea that it's a much better bet for them to be on the same side as a governor with a 70-plus percent approval rating than to be against him. Case in point: The Senate vote on this tax package was unanimous, despite the fact that three years ago, when the tax we just half-renewed was put in place, Republicans raged against it.
Josh: Does the enthusiastic compliance from the Republicans not also have to do with the amount of leverage they have now, as opposed to three years ago? There was a time, not too long ago, when they might have set their sights considerably higher in a situation like this than achieving a partial repeal of the payroll tax.
Jimmy: You're correct. They couldn't play their hand too hard because they need two things from Cuomo that are only tacitly promisable: Cover during redistricting, which Cuomo wants to wrest from their hands, and a non-aggression pact in next year's election.
I think that's why they didn't go for straight extortion, as they might have in the past. They know their majority is fragile, and protecting it is their paramount concern. It far outweighs any legislative item.
Josh: Do you think they got Cuomo to agree to either of those things? I kind of thought the prize was the commuter tax.
Jimmy: Well, that was why this was, as Sen. Hugh Farley told me, "a brilliant piece of legislation."
The Long Islanders and Hudson Valley legislators got this rollback of the payroll tax, which is something they've long hated. There was money for flood victims upstate. And we're going to speed up borrowing and spending money for infrastructure that we've already authorized. So all but the most principled legislators ended up supporting this for parochial reasons.
Josh: I guess that's why I assumed Cuomo wouldn't have had to promise the Republicans anything on redistricting or 2012 in order to get them on board here. The parochial stuff counts for a lot!
Can we talk about spin, for a moment? Because this is kind of a funny one.
The joint release from Cuomo and the legislative leaders announcing the plan meticulously listed before-and-after tax rates for people in each of the newly created income brackets. According to these numbers, everyone in every bracket was getting a tax cut. The release also said that the tax overhaul was going to net New York State $1.9 billion in additional revenue.
So the thing is it is impossible for both these things to be true, except on the most technical level. You don't collect more money by collecting less money.
(The governor's announcement makes it work with selective accounting, using the precise timing of the expiration of the millionaire's tax to factor it in only where it supports the desired conclusion.)
But that's the neat thing about the plan, from a presentation perspective. By changing the base assumptions to include or not include the millionaire's tax, it lets anti-tax conservatives and pro-social-safety-net liberals all sell the plan as a win, if it suits them to.
Which is the right way to look at it, though? Is it a cut or a hike? Is the state gaining revenue or losing revenue?
Jimmy: Well, by today's rates, it's a cut.
An individual making between $20,000 and $75,000 will see his top bracket rate fall from 6.85 to 6.45 percent; people from $75,000 to $200,000 will drop to 6.65 percent. That 6.85 percent rate is the same rate that was in place for them in 2009, so again, they will see a slight drop in taxes.
When you get to millionaires, it depends on your starting point. If the legislature did nothing, their top bracket rate would fall from 8.97 percent to 6.85 percent. Instead, it just goes from 8.97 to 8.82 percent.
So are you hiking by 1.97 points or cutting by .15? Since it's not yet Jan. 1, you can argue you're cutting. But since your budget for next year doesn't book the revenue from these tweaks, you are gaining. You are gaining $1.9 billion.
(You can see the relative pain and gain on this chart.)
Essentially Cuomo and Skelos renewed about half of a temporary tax hike that they once opposed, and until last week said they wanted to expire. They also, though, did cut taxes for individual New Yorkers reporting between $20,000 and $200,000 in income.
Josh: What happens next? I think the governor said earlier that this package takes care of half the work they would otherwise have had to do to get the next budget in shape. So how do they follow up on this?
Jimmy: Now they need about $1.5-$2 billion in spending cuts in the budget, and it will be VERY HARD for liberals to argue that you should stem them by raising taxes or doing other gimmicks. Recall: Cuomo can pretty much jam the legislators to adopt his budget, using that David Paterson trick of putting it into the emergency extenders.
So, if they don't come to a kumbaya agreement, if it gets nuclear, Cuomo is insulated. The question becomes how you get that money. My guess is the governor will argue that agency redesign, something he didn't get to last year, will be a big part of it.
Josh: And how's his insulation on the other flank? The Post and Journal editorialized against his tax hike, but he seems to have taken a lot of the force out of the criticism by quickly getting business groups on board with the plan. If actually rich-businessy New Yorkers aren't the constituency they're arguing for, then the only people left yelling about it are conservatives who saw the tax cuts as a means to shrink government. It's an argument, but it's a more ideological, less retaily argument than EVERYONE'S GOING TO MOVE TO CONNECTICUT.
Jimmy: Yeah. Politics 101: It's not just the points in your argument, it's the power behind it.
So if these business types aren't going to drop $10 million in ads making their case to the public (quite the opposite: they may drop $10 million defending Cuomo's move. We'll see) then how long can the far-right cry?
Granted, they have the Murdoch empire, which Cuomo clearly enters into his equation. But if they're isolated in this campaign, then they stand to lose more from their break-up with Cuomo than Cuomo does.