Tax the Ultrarich? Cuomo Resists, Even With a $14 Billion Budget Gap

For years, progressive Democrats in Albany have been pushing a three-word solution to many of New York’s problems: Tax the rich.

Yet year after year, proposals to make the wealthy pay more were blocked by Republicans.

Now, however, their most staunch opponent may well be the state’s third-term governor, Andrew M. Cuomo, a socially progressive Democrat who often boasts of his history of tax cuts.

That approach appeals to most taxpayers, and is easier to understand during a decade of financial growth. But as the coronavirus pandemic has transformed New York’s financial problems from merely troubling to catastrophic, a growing contingent of Democrats in the all-blue Legislature is pushing the governor to reconsider his stance.

They say the state must increase taxes on the wealthy to safeguard services for New York’s neediest, which could be decimated if the state were forced to make broad cuts because of the looming deficit.

“We are playing with fire: These are people’s lives,” said State Senator Alessandra Biaggi, a Democrat representing parts of the Bronx and Westchester County who is co-sponsoring a bill to tax the ultrawealthy. “It is not OK to not act.”

The fiscal hole is daunting: The state faces a $14.5 billion budget gap this fiscal year, according to budget officials.

Mr. Cuomo, however, says the potential benefit of new revenue from taxing the rich would be far outstripped by the negative impact on the state’s highest earners, who already shoulder the bulk of the state’s taxes.

“I don’t care what you increase taxes to, you couldn’t make up that deficit,” Mr. Cuomo said last week upon releasing a letter asking congressional leaders for a whopping $59 billion to cover two years of projected state deficits and more.

“There is no combination of savings, efficiencies, tax increases that could ever come near covering the deficit,” he added. “We need the federal government to assist in doing that.”

But supporters have framed the tax increases as an alternative to the steep cuts to local governments and schools that Mr. Cuomo has threatened to implement if Congress fails to approve a federal stimulus package to cover the shortfall.

Raising taxes on the wealthy has long had the backing of the Assembly and its speaker, Carl E. Heastie, and it recently gained the endorsement of the Senate majority leader, Andrea Stewart-Cousins, bestowing the effort renewed political momentum.

In late July, Ms. Stewart-Cousins cited the coronavirus crisis in throwing her support behind taxing “multimillionaires and billionaires to help our state shoulder this extraordinary burden.”

Her statement was an encouraging sign for the left-wing activists, unions and more than 100 Democratic lawmakers who have indicated they support raising taxes on the wealthy to lessen the blow of budget cuts.

“At some point, the waiting game with Washington will run its course,” said Michael N. Gianaris, a state senator from Queens and the deputy majority leader. “And I think we’re just about there.”

While Mr. Cuomo and others have been pleading for help, it seems unlikely that any deal in Washington will make the state completely whole.

The negotiations between Senator Mitch McConnell of Kentucky, the Republican majority leader, and his Democratic counterpart, Senator Chuck Schumer of New York, have been slow-moving, with most expecting only a slimmed-down version of an aid package to pass.

On Thursday, Mr. Schumer sent a letter to his Democratic colleagues, saying Mr. McConnell and the White House “may cut their original, inadequate, $1 trillion ‘skinny’ bill in half,” with “no money for state and local services.”

Barring generous federal assistance, state budget officials say that there are really only three ways out of the current crisis: taxing, cutting or borrowing. The state has already resorted to the latter, taking on $4.5 billion in short-term loans, due to be paid back at the end of the year.

Mr. Cuomo’s budget officials have already begun to reduce spending in case federal lawmakers and the Trump administration fail to agree on additional aid for states.

State officials have withheld about $1.9 billion in payments to localities, school districts and nonprofits, affecting providers of mental health and substance abuse services and creating financial uncertainty for schools on the brink of reopening.

Robert Mujica, the governor’s budget director, said officials were still deciphering how much money they would withhold from a large $3 billion payment to schools in September, noting officials would be careful not to disproportionately cut funding from poorer school districts.

But he warned that the withheld payments — allowed under extraordinary emergency powers the Legislature granted the governor earlier this year — could become permanent cuts if federal aid does not come through.

In total, budget officials said they’re on track to cut up to $8 billion in local aid.

Fearful of…