ALBANY, N.Y.—New York’s tax commissioner warned legislators during a Tuesday budget hearing that reinstating the state’s stock-transfer tax could prompt migration of trading activity to other areas.
Michael Schmidt, who was appointed by
Gov. Andrew Cuomo
in 2019, said the coronavirus pandemic and federal limits on the deductibility of state and local taxes enacted in 2017 raised the risk that high-income taxpayers could leave New York with additional levies.
Mr. Cuomo, a Democrat, has proposed raising $1.5 billion by increasing taxes on people reporting $5 million or more of income and an additional $394 million by delaying a scheduled decrease in rates for middle-class payers.
The governor’s plan addressed part of a $10.2 billion deficit in his proposed $193 billion budget; it also relies on $3 billion in additional federal aid, though Mr. Cuomo has said he is seeking at least $15 billion from Congress and would abandon his proposed tax changes if the funding materializes.
Democrats who control the state Assembly and Senate say they want to raise taxes even if more federal funding arrives so the state can increase funding for social-service programs and maintain the amount of funding it devotes to schools. Mr. Cuomo proposed using some federal pandemic aid to supplant state school funding.
Some Democratic lawmakers also support proposals for a tax on financial transactions and a “mark-to-market” tax on billionaires’ wealth. New York enacted a stock-transfer tax in 1905 but stopped collecting it in 1981. The “mark-to-market” tax would require billionaires to pay capital-gains taxes each year as their assets appreciate, even if they don’t sell. Mr. Schmidt pushed back on both of those ideas.
“When you consider the effect that even a seemingly small tax would have on trading activity migration and relevant location of jobs, I would just say there’s a lot of uncertainty about that, and I’d be very cautious on banking on any revenue associated with a financial-transaction tax proposal,” he said.
Mr. Schmidt said the mark-to-market tax would require his department to evaluate and audit assets on a new scale. “That would be like learning a completely different sport than the sport we’re currently playing,” he said.
Major financial exchanges in New York wrote a letter to lawmakers earlier this month saying such a tax could prompt the relocation of their operations. On Tuesday, an industry group estimated financial services firms employed 369,300 people in New York in 2019.
Proponents of the transaction tax say most of it will be paid by large financial firms that conduct large trades.
“New York’s financial sector is overgrown, raising the cost of living for the many while enriching a small sliver at the top,” Michael Kink, executive director of the Strong Economy for All coalition, which is backed by labor unions, wrote in budget testimony.
Mr. Schmidt said Mr. Cuomo’s proposal for higher rates would affect around 17,000 taxpayers, and the delayed tax cut for the middle class would affect around 4.7 million filers. The highest-earning 2% of taxpayers in New York—around 188,000 filers—account for just over half of all income-tax payments. Both Republican and Democratic legislators said they didn’t want to delay the middle-class tax cuts.
Tuesday’s hearing was one of the last before members of the Senate and Assembly advance budget counter proposals. The state’s current spending plan expires on March 31.
The governor on Monday said the state budget office had increased its revenue forecast by $1.6 billion, based on better-than-estimated receipts. Republicans said this funding should be used to forestall the proposed income-tax increase.
“The rush-to-tax mentality from New York liberals has been around long before the Covid pandemic, but it certainly intensified this year,” said Assembly Minority Leader Will Barclay, a Republican from Oswego County. “The strength in the revenue numbers released today, combined with potential federal aid, should take tax increases completely off the table.”
Sen. Liz Krueger,
a Democrat from Manhattan who chairs her chamber’s finance committee, said she supported raising more revenue.
“I’m pretty agnostic about how we get it,” she said. “The least disruptive way possible would be preferable.”
Write to Jimmy Vielkind at Jimmy.Vielkind@wsj.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Source: WSJ – US News