New York Reaches Agreement on $ 212 Billion Budget to Boost Economic Recovery

New York State leaders announced they had reached an agreement Tuesday on a $ 212 billion state budget that includes tax increases for the wealthy, as well as substantial relief for renters, undocumented immigrants and homeowners. businesses most affected by the coronavirus.

Many of the key budget initiatives are aimed at driving the recovery of a state that was the epicenter of the pandemic.

Includes $ 2.3 billion in federal funds to help tenants in arrears with rent; $ 1 billion in grants and tax credits for small businesses that suffered from the economic downturn; and a $ 2.1 billion fund to provide one-time payments to undocumented workers who did not qualify for federal stimulus checks or unemployment benefits, according to budget highlights released by the governor’s office.

All were proposals championed by Democratic leaders in the state Legislature, who took advantage of Governor Andrew M. Cuomo’s weakened political position to push vigorously for his priorities, including an increase in the long-sought personal income tax rate for women. people making more than $ 1 million, topping the governor’s. long-standing aversion to raising taxes on the rich.

Two new tranches would also be introduced for revenues in excess of $ 5 million and $ 25 million. The changes mean that wealthy New York City residents would effectively be subject to the highest combined state and local personal income tax rates in the nation, outperforming California.

The ramifications of the tax changes are sure to spark a contentious debate in the coming months. Progressives view them as essential in helping pay for new liberal priorities for vulnerable New Yorkers, especially after the pandemic increased unemployment and closed businesses. But there is concern among conservatives that higher taxes could lead wealthy New Yorkers, some of whom may already be working remotely, to permanently move to lower-tax states like Florida.

The spending plan, roughly 10 percent higher than last year’s budget, is far from the apocalyptic scenario that officials envisioned earlier this year, when the state was considering tackling an overwhelming $ 15 billion budget hole in two years through sharp cuts and tax increases.

Since then, revenues have been better than initially anticipated, although they are still behind pre-pandemic levels. The state also received a one-time injection of $ 12.6 billion in direct aid from Washington, as well as billions of dollars in funding for education and transportation.

Even when the governor faces multiple allegations of sexual harassment and calls for his resignation, Cuomo was able to reclaim some of his own policies in budget negotiations, where governors traditionally wield great influence.

The budget deal will authorize mobile sports betting, bringing a potential revenue stream of nearly $ 500 million a year to New York, which has seen neighboring states like New Jersey and Pennsylvania tap into that market. But proposals to accelerate casino development in the New York City region were removed from the budget.

Cuomo successfully fought for the inclusion of $ 1.3 billion that will help pay for a plan to rebuild the blocks near Penn Station in Manhattan, a controversial project that could include 10 new towers and has already drawn reprimand from local community boards. and elected officials. . State funding, however, would be limited to transportation-related improvements, in accordance with budget documents.

The governor also secured the state’s authority to withhold 50 percent of state and federal funds from localities that do not produce plans to reform their police departments, which Cuomo ordered through an executive order in the wake of George Floyd’s protests. last year. It also includes a program to make broadband Internet more affordable and a package to improve patient services in the state’s nursing homes.

The budget, which has yet to be approved by the Legislature and the governor, would significantly increase spending in New York, which is already one of the highest spending states, leading some tax analysts to warn of the dangers of maintaining record levels. spending once federal. the funds dry up.

New tax increases for the wealthy and corporate tax increases are expected to generate more than $ 4 billion in additional revenue each year. The tax increases are expected to affect 50,000 taxpayers, said Liz Krueger, Democrat and chair of the finance committee in the state Senate.

“This is not a tax increase for the vast majority of New Yorkers,” Krueger said on the upper house floor Tuesday. Still, the increases will apply to an integral part of the state’s tax base: The top 2 percent of the highest-income New Yorkers pay about half of the state’s income taxes.

Under the changes, the personal income tax rate would increase to 9.65 percent from 8.82 percent for individuals earning more than $ 1 million and for joint taxpayers earning more than $ 2 million.

Two new tax brackets on personal income would also come into effect: 10.3 percent for income between $ 5 million and $ 25 million, and 10.9 percent for income over $ 25 million. The new rates would expire at the end of 2027.

The budget delay, which was due April 1, resulted in delayed paychecks for thousands of state employees, according to the state comptroller.

The so-called excluded workers fund was among the latest sticking points in budget negotiations, sparking some infighting among Democrats, including some who fear it could be used as a political rift with moderate suburban voters in 2022. Sure, but it would effectively provide unemployment benefits for undocumented workers who lost income or were unemployed during the pandemic and did not qualify for federal aid. Applicants will need to provide certain documents to verify their identity, residency, and work-related eligibility.

Conservatives criticized the plan, and Nick Langworthy, the chairman of the Republican Party, called it “arousing madness.”

“Democrats are about to pass a budget that increases taxes on New Yorkers and businesses by $ 4 billion while enacting a $ 2 billion fund that will provide payments of $ 25,000 to illegal immigrants,” Langworthy said Tuesday. .

The rental assistance program is expected to be an urgent lifeline for low-income tenants who owe rent or are at risk of eviction because of financial hardship as a result of the pandemic. Eligible tenants would be allowed to cover up to 12 months of rent and utility costs, as well as three months of possible rent, financed with funds allocated by the federal government.

The settlement also includes $ 600 million in homeowner assistance and property tax relief for New Yorkers making less than $ 250,000. There is also $ 250 million for the New York City Public Housing Authority and $ 100 million to facilitate the conversion of hotels and vacant properties into affordable housing, an idea that gained momentum as much of Manhattan’s business districts they were emptied during the pandemic.

School districts across the state are also poised to receive a significant cash injection, some $ 4.2 billion, over the next three years. The money will provide additional support to districts with large numbers of high-need students and struggling schools, including New York City. The state will distribute approximately $ 1.4 billion per year for the next three years, then provide approximately $ 4.2 billion for schools annually, a significant increase from current funding levels.

The provision is the result of a two-decade legal and advocacy battle, known as the Campaign for Fiscal Equity, to force New York to boost school funding under a formula focused on high-need districts. In 2006, the State Court of Appeals ruled that New York was denying children their right to a sound basic education, which is guaranteed by the State Constitution. The new financing outlined in this year’s budget fully meets the demands of the lawsuit.

This year marks the first time the Legislature has committed to the financial obligations set forth in the lawsuit.

Eliza Shapiro contributed reporting.

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