Gotham Gazette Tue, 19 Feb 2019 15:31:18 +0000 Joomla! - Open Source Content Management en-gb (Webmaster) What's The [Data] Point? 18.6%, New York's Inequality & Social Safety Net whats the data point

What's The [Data] Point? Episode 60 -- 18.6%, Inequality and the Social Safety Net, with Greg David and Cara Eisenpress [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

gregdavid caraepress amazon18.6% is the poverty rate in New York City. Greg David and Cara Eisenpress, both from Crain's New York Business and the Craig Newmark Graduate School of Journalism at CUNY, discuss their recent reporting exploring New York City's safety net, how it's funded, and how it compares to other places, while showing that the city's robust safety net is made possible by the city's vast inequality and tax structure.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

by Ben Max, Gotham Gazette

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What's The [Data] Point? 18.6%, New York's Inequality & Social Safety Net Fri, 30 Nov 2018 05:00:00 +0000
A Closer Look at the Tax Incentives in the Amazon Deal govcoumo realestate

Cuomo, de Blasio & an Amazon rep celebrate (photo: Kevin P. Coughlin/Governor's Office)

Amazon’s decision to put a corporate campus in Long Island City after a year-long, somewhat-public search for a host city and a series of incentives from New York City and State has drawn skepticism and outrage in Queens and beyond for a number of reasons.

Some activists and elected officials oppose the secretive process by which Amazon got its land, tax breaks and grant, others feel like the company isn’t a corporate entity the city and state should be welcoming because of labor, political and other practices. But all of the opponents to the Amazon deal seem to agree that that package of roughly $3 billion in incentives the trillion-dollar corporation is getting from New York is out of bounds, an inappropriate giveaway based on old economics, in the midst of both a strong overall city economy with low unemployment on one hand and affordable housing, public housing, and transportation crises on the other.

And while a look at the programs in question reveals that Amazon doesn’t appear to be getting tax incentives or breaks that wouldn’t be available to other large employers who set up shop in New York, economists and budget watchdogs suggest the outrage over the tax break package Amazon is getting presents an opportunity to reexamine New York’s use of subsidies to entice companies. (Note: there is one discretionary capital grant in the deal for roughly $500 million that is separate from the $2.5 billion in city and state tax incentives.)

Where does the money come from?
The three largest incentives Amazon is getting from New York come from three as-of-right (that is, incentives available to any company that meets the requirements) programs: the Excelsior Jobs Credit Tax Program, the Relocation and Expansion Assistance Program (REAP) and the Industrial and Commercial Abatement Program (ICAP). The latter two tax breaks are incentives established by the state government that affect the city tax rolls, while the former program affects state tax rolls.

“They’re state created, like 421-a,” John Kaehny, the Executive Director of Reinvent Albany, told Gotham Gazette about ICAP and REAP, with reference to the tax break known as 421-a that seeks to incent housing development with some affordability included. “So the New York City Department of Finance administers them, but they have to, they're made to by state law. Basically it's money that the state is directing be taken out of the city's tax revenue.”

Along with their as-of-right nature, all three programs require a company actually delivers jobs in order to take advantage of the breaks. In that sense, Amazon is no different from a hotel company or mobile phone infrastructure company or real estate company in applying for the programs. In the case of the Excelsior program, Amazon is taking advantage of a refundable tax credit equal to 6.85 percent of the total wages per new full-time job they create, and a capital investment credit equal to 2 percent of a company’s total qualified investments that result in new jobs.

For the city tax breaks, ICAP is a tax abatement program that may last up to 25 years, available to companies who undertake new commercial construction in areas outside of some exempted sections of Manhattan. It appears Amazon will be eligible for a 15-year ICAP that begins to decline in year 12. REAP is a per-job tax credit in which companies from either outside New York City or below 96th Street in Manhattan get a $3,000 per employee credit for 12 years for each employee that moves into the new office outside the REAP area.

In addition to the above programs, Amazon is also getting a cash grant from the state called an Empire State Development Capital Grant that’s potentially worth $505 million and is supposed to help defray some of the costs from building the new corporate campus. And because New York State is taking over the land where the office will be located and making it tax-exempt, Amazon will make payments in lieu of taxes (PILOTs) that the city has said will be equal to the property tax bill the company would pay on the land otherwise. Half of the money from the PILOT will go to the city’s general fund, and half of it will go towards infrastructure improvements around Long Island City.

All told, the tax breaks from the jobs credit, ICAP and REAP and the capital grant could wind up adding up to $3 billion in incentives to Amazon, if the company delivers the 25,000 jobs it’s promised over the course of 10 years.

What’s the problem exactly?
In his media appearances and statements to defend the incentive package, Governor Cuomo has suggested that these kinds of tax breaks are just the cost of doing business in America. But some economists, like James Parrott, the Director of Economic and Fiscal Policies at the Center for New York Affairs, say the programs are working off of a somewhat dated economic model, especially since he found that the city gave up almost $6 billion in tax revenue in Fiscal Year 2018 thanks to a stew of incentive programs like ICAP and REAP.

The predecessors to ICAP and REAP arrived in “a different historical economic context, coming on the heels of the 1970s when there was a lot of corporate headquarters movement out of New York City,” Parrott told Gotham Gazette. “With the loss of 600,000 jobs between 1973 and 1979, it was a really difficult economic period for the city. So in the 1980s the city put in place, and ramped up its commitment to subsidize corporations to stay in New York City, to relocate to New York City and to add employment.” But these days, Parrott says the city’s economy is healthy enough to function without massive incentives.

“We're now at a point where the total employment level in New York City is 4.3 million, almost 700,000 to 800,000 higher than it's ever been before,” he said. “Arguably New York City doesn't need to do anything to subsidize new economic development investments, given the very rapid employment growth we've had in recent years.”

Though he continues to stress that his administration refuses cash grants to companies, de Blasio also continues to defend the Amazon deal, including the use of the subsidies involved, again doing both during his weekly NY1 appearance on Monday. “[W[hat we need to move towards is a society where it’s not about cities competing” over companies, the mayor told host Errol Louis. “The specific incentives were automatic and part of state law,” was also part of his defense, and he suggested that if people want to see an end to the as-of-right programs, people should debate that in the future.

Parrott said he could understand the use of the Excelsior programs upstate, given the region’s struggling economy and what he said was a better oversight process than the program’s predecessor, the extremely troubled and criticized Empire Zone program. But the entire program also has an annual cap ($183 million in 2019 and steadily decreasing to $36 million in 2024 per the Citizens Budget Commission) that will have to be raised by the state Legislature if Amazon creates all of the jobs it’s promised, leaving Parrott to wonder, “why on Earth, if you have these limited tax credit resources, you spend those in New York City? The one place in the state that that least needs economic development subsidies?”

Kaehny sees some self-promotion as a motivating factor in giving state money to Amazon, specifically on the part of the governor. “Cuomo wants to create a narrative that shows that he had some agency, that he was the one that closed this deal with Amazon, that he did something that caused this deal to happen,” Kaehny said. “If Amazon says, ‘Well we don't care about the subsidies at all, we really just wanted New York City and this terrific dynamic place with a huge job market of talented people, the kind that we want working for Amazon and we don't really need subsidies,’ well then what's Cuomo’s role in landing the deal?”

It’s an especially pertinent question according to Kaehny and others who insist that Amazon was probably going to come to New York anyway. Both before and after identifying Long Island City as one of its landing spots, Amazon officials said that the ease of recruiting tech talent was the key ingredient in their search. A request for information that Amazon sent to Somerville, Massachusetts included one question about the incentive package the city could offer, but multiple questions about quality of life and the area’s working populations.

That in turn raises the issue of where New York should actually invest, in businesses or in infrastructure, according to Jonas Shaende, the chief economist at the Fiscal Policy Institute. “Should we just give [companies] tax subsidies outright or should we invest in what makes New York so attractive and so vibrant and so great? In the things that that are the real factors in in their decision making, things like the transportation system, the affordable housing the access to to labor, to education facilities those kinds of things.”

Shaende wasn’t alone in that line of thinking, as redirecting state subsidies from corporations towards local infrastructure was a centerpiece of the Marc Molinaro and Stephanie Miner campaigns for governor.

It’s real money
Another one of the governor’s defenses of the incentive package is that New York isn’t actually paying Amazon anything at all, but rather is letting the company pay slightly less in taxes than it would otherwise. In his “op-ed” published to the governor’s official website, Cuomo writes:

“Our proposal offered that, when and if those revenues are realized, the government would effectively reduce their $1 billion payment by about $100 million for a net to New York of approximately $900 million. New York doesn't give Amazon $100 million. Amazon gives New York $900 million.”

It’s a rhetorical sleight of hand that doesn’t pass muster with any expert Gotham Gazette spoke to. “I mean, that's just fundamentally wrong because essentially all economists left, right, wherever agree that a tax abatement or tax credit is a form of expenditure by government and is rightly called a subsidy,” Kaehny said, pointing out that the Governmental Accounting Standards Board (which sets the rules for financial reporting by government entities) now has a rule that counts subsidies as expenditures.

And in the case of the capital grant Amazon is getting, the cash is very much real. “It's clearly a case where it's a budget choice [Cuomo's] making, here's $500 million in taxpayer resources we're going to give to Amazon rather than use it for something else,” Parrott said.

“[Cuomo] happens to have a reserve of resources, out of which it’s very likely that this money is going to come,” Parrott said, talking about New York settlements reached with banks who are alleged to have committed mortgage securities and other financial fraud. “Although there wasn't anything said in the memorandum of understanding with [Empire State Development] and the state and the city that said where the capital monies are going to come from, my guess is it will come out of the reserve,” he said. Cuomo has indicated he does not need legislative approval for the capital grant, but legislators, especially those opposing the deal like Queens state Senator Michael Gianaris, are exploring all their options to block or change the deal.

The Citizens Budget Commission was measured in its critique of the grant, comparing the reimbursement-style payments as better than upfront costs the state has taken on with, for instance, the $750 million solar panel plant it built in Buffalo. But CBC still criticized the ongoing lack of oversight for where the money would come from. The grant has also been criticized in multiple corners as a sop to Cuomo-friendly construction unions, with critics charging the state is essentially paying Amazon to use union labor.

And the subsidies also open New York up to the double whammy of even more companies asking for the kinds of tax breaks Amazon is set to receive while at the same time trying to provide services and pay for them in a state budget operating under the governor’s self-imposed 2 percent cap on annual spending increases.

“It’s not a fiscally responsible way of running government,” Shaende said. “It could be potentially highly problematic for the state, because the state still relies on taxes. And we have the 2 percent spending growth cap, we have all sorts of measures that that the governor adopted to show that he's running a very fiscally responsible shop. He saves money, let's say, by cutting services, by finding efficiencies, in joint services between municipalities. So he saves, you know, a couple of nickels here a couple of dimes over there, and then he just splurges like this.”

Could this spur change?
As lawmakers scramble to find a way to stop or change Amazon’s incentive package, there’s at least some hope among reformers that the publicity surrounding the deal can lead to a change in how the state and city use tax incentives. The incentives all going towards one company has already brought more attention to the ways New York uses them than their use for the Hudson Yards development, Parrott said, despite the fact that “the total cost of the Hudson Yards tax breaks rival the amount of the city and state subsidy to Amazon.”

The surrounding outrage may also give new life to the proposed subsidy tracker known as the “Database of Deals,” an idea that Reinvent Albany’s Alex Camarda pointed out “is not rocket science” in Assembly testimony for more accountability in the state’s economic development funds last year. It is a transparency measure Comptroller Tom DiNapoli has called for but Cuomo has opposed; it passed the Republican-led state Senate earlier this year, but was not given a vote in the Democrat-led Assembly.

According to Shonede, the database not only could provide transparency to what’s going on in the state, but a better template for future spending.

“As a community of experts, we need to stress some basic accountability, how many jobs we get per dollar spent, and what kind of jobs they are,” Shoende told Gotham Gazette. “And if we do that, in a consistent and serious way, a basic accounting of these efforts, it’s going to be obvious that the best way to improve the situation with income inequality, and lack of good jobs in vulnerable communities and improving the business climate have to do with what the traditional role of the government is supposed to be. And that is making sure that people are safe, that they are well prepared for the market, and that the infrastructure is such that it minimizes the business costs for the businesses that you see operate in the neighborhoods,” he said.

And so in his own way, despite resisting intensive oversight of the state’s economic development initiatives, the governor may have inadvertently dragged the state’s subsidy programs further towards daylight. “This is kind of a like peeling the onion of Albany dysfunction and scurviness in a microcosm, this deal,” said Kaehny. “Because there's all this stuff baked in here that's been going on for a long time time. But it's like for the first time people in New York City were like ‘Oh s***,’ but reality is they've been doing this for many, many years.”

by Dave Colon, Gotham Gazette

Read more by this writer.

Note: this article has been updated with more clear description of Amazon's eligibility for ICAP.

A Closer Look at the Tax Incentives in the Amazon Deal Wed, 28 Nov 2018 05:00:00 +0000
Tax Issues at Center of State Elections, Albany Year to Come Cuomo taxes

Gov. Cuomo (photo: Don Pollard/Governor's Office)

When the dust settles on the 2018 elections, whoever is governing the state will be faced with problems like what to do about NYCHA and the MTA, and how New York should respond to climate change, among many others. Another pressing issue that has been an area of focus in many campaigns around the state, from the governor’s race through those for the state Senate, is taxes, and what the next governor and Legislature will or won’t do about them in a number of ways, including the ongoing question of how New York must adjust to the new federal tax code.

Though proposals and arguments have often been hazy, the issue of taxes has been among the most discussed this election season and will be a topic of significant debate when the new state government starts doing business in January. The contours of those discussions and the actual proposals put forward will vary greatly depending on the outcomes of the governor’s race and which party controls the state Senate (the Assembly is home to an overwhelming Democratic majority).

Marc Molinaro, the Republican nominee for governor, has pitched his candidacy largely based on a plan that he says will lead to a 30 percent reduction in property taxes for New Yorkers over five years, but the party’s state Senate conference, hoping to cling to a one-seat majority during a promising year for the opposition, has mostly stuck to arguing that Democrats will increase taxes to previously unseen levels if given full control of state government.

For their part, Democrats have been quieter on taxes, with Governor Andrew Cuomo promising to extend the state’s property tax cap and keep state spending to two percent annual increases, even as some members of his party’s Senate slate push for things like state-run single-payer healthcare and a polluter’s tax -- neither of which Cuomo supports. Running for a third term, Cuomo has said little else about taxes, despite the fact that his attempts to thwart the impact of the federal tax reform have thus far not panned out, the state’s current millionaires tax is set to expire next year, the state is facing upcoming budget gaps, and the state-run MTA is in need of tens of billions of dollars to get the New York City subway system functioning properly.

Molinaro has made broad tax reform one of the centerpieces of his campaign, along with restoring trust in government and generally being a governor who isn’t followed by corruption investigations. His tax plan proposes reductions across the board, from the end of the millionaires tax to an expansion of the earned income tax credit to childless workers and noncustodial parents and the indexing the state’s income tax brackets, standard deduction and dependent exemptions to inflation (a move that Molinaro says prevents a filer’s tax bracket increasing due to inflation without any real change in their earning power).

Molinaro wants to limit annual state spending increases to three percent, but wants that cap codified into state law, unlike Cuomo’s two percent cap, which is self-imposed and the governor, despite his claims to the contrary, has not completely kept to.

The Dutchess county executive’s plan has “a lot of good elements in it and establishes some very worthy and desirable goals,” according to E.J. McMahon, the founder and research director of the conservative Empire Center of New York, although McMahon said he didn’t think the math behind the plan added up to the promised 30 percent reduction in property taxes. Asked repeatedly throughout the campaign, Molinaro has not laid out exactly how he would get there, only promising in broad terms to modernize state government, find efficiencies, and more effectively deliver services.

On the Democratic side, clarity also doesn’t come easy. Cuomo’s priorities on socially liberal but fiscally moderate governance can be seen most clearly in something like his Long Island Senate Democratic Agenda, but even that plan lacks specifics and has seemingly competing priorities. On the one hand, the agenda lays out a promise to keep the two percent property tax cap and the two percent spending cap going, while also promising “historic tax cuts.” On the other hand, there are promises to include Long Island in increased infrastructure, education, and economic development funding.

Cuomo has resisted calls for a New York City-based addition to the millionaires tax, recently pitting his philosophy against Mayor Bill de Blasio in sarcastic terms, saying, “'[W]ell, ideally we would like to have a millionaires tax.' Yes, I wish I could be an elected official who lived in the ideal,” at a gathering of the Association for A Better New York, a business group. He also explicitly cast himself as a different kind of politician than legislators and local politicians “who like to spend” at a speech in front of the Business Council of New York, boasting that he has overseen lower year-over-year state spending increases than previous governors including Republicans and his father.

Part of the lack of clarity on the Democratic side has to do with the uncertainty of where the party will be after the general election. A newly won Senate majority may rely on seats outside New York City, which would require a collaboration of city, suburban, and upstate interests that don’t always align perfectly. And even as Democrats in swing districts run on platforms that include single-payer healthcare in New York, they are pledging not to increase the taxes that would fund it, and many are seeking to represent high-tax Long Island and north-of-the-city areas very sensitive to any additional tax increases and another election right around the corner in 2020, when all the seats in the Legislature will again be on the ballot.

“I think out of the gate you're gonna see a Senate Democratic Conference that's gonna correct some of the wrongs, the missed opportunities by the Senate Republicans like voting reform and gun control, women's health,” Democratic state Senate spokesperson Mike Murphy told Gotham Gazette, suggesting the party would focus on progressive social issues at the beginning of the 2019 session if in the majority. And even as the New York Health Act that would establish state single-payer health care emerged as a hot issue for New York City progressives, among other Democrats, they will have the state’s expiring laws around rent control to deal with next year, and candidates outside of the city, like the Hudson Valley’s Pete Harckham, want much of a full two-year term to work out how a single-payer program would look, or to craft a universal health insurance program compromise with Cuomo.

On the issues of the new federal limitations on state and local tax (SALT) deductions, which dramatically affects high-tax states like New York, the state has joined with other Democratic states to sue the federal government over the $10,000 cap that was included in federal tax reform efforts, in part on the grounds that they were targeted after not voting for Donald Trump for president. At the same time, the IRS has blocked efforts by New York and other states to get around the deduction cap by limiting the federal tax credit taxpayers would get by “donating” their property tax payments to charitable organizations designed to accept the taxes.

Cuomo has been otherwise quiet about how he would solve the issue of the SALT deduction problem, which is likely to most acutely hurt high earners as well as suburban middle and upper middle class property owners, though he has said one goal is for Democrats to recapture control of the federal government and repeal the deduction cap.

The governor has been silent on the question of whether the millionaires tax will be allowed to sunset next year as it's currently designed to -- it has been extended multiple times under Cuomo, in partnership with a split Legislature, and there is a significant question around how the state would make up for the revenue if it is not extended. On the other hand, it affects many individuals and families that will be paying higher taxes given the new SALT cap, and Cuomo and others have expressed concern about high-income individuals leaving the state. Cuomo’s campaign did not provide an answer to multiple Gotham Gazette inquiries about the governor’s stance on the millionaires tax.

Molinaro has said he would let the millionaires tax expire.

His plan on the SALT deduction cap is to get rid of New York’s “tax benefit recapture” policy, a practice that charges the highest marginal tax rate for taxpayers above a certain income band, for New Yorkers making between $107,650 and $323,200, thus addressing some of the lost deductions for those earners.

Tax shifts rather than cuts or increases are the most common kinds of plans on the table from both parties. On the Democratic side, Long Island’s John Brooks, running for reelection in a swing district, has offered up a plan that he says would allow areas like Long Island to get out from under high property tax bills related to education spending by capping the amount of school funding coming from property taxes at 50 percent, with any budget needs above 50 percent picked up by the state.

“What Brooks is saying is we need to lower your taxes by finding someone else to pay them. But if you're in Long Island, there is no ‘someone else,’ it's you, you have the higher average incomes,” McMahon said in reaction to the proposal.

For Republicans, requiring the state government to pick up Medicaid costs from local governments is something that Molinaro and state Senate Republicans are running on (to the delight of local editorial boards). It would cost $7 to $8 billion, and require either new or higher taxes or a reduction in the actual delivered services according to a Citizens Budget Commission study on the shift (Cuomo has mocked it as an unserious proposal). But the state Senate conference has also endorsed the idea of exempting seniors from paying property taxes, arguing that since they don’t make use of the schools, they shouldn’t pay to keep them running. It’s a proposition McMahon has panned before and he compared it unfavorably to Brooks’ plan as irresponsible and unfeasible. “How is that fair to a working couple with three or four kids living paycheck to paycheck, and the retired couple next door get to pay no property tax? Are you kidding?”

by Dave Colon, Gotham Gazette

Read more by this writer.

Tax Issues at Center of State Elections, Albany Year to Come Sun, 04 Nov 2018 04:00:00 +0000
Federal Corporate Tax Cuts Just Gave New Billions to New York Businesses - What About the MTA? govcuomo mta transit

(Photo: Don Pollard/Office of Governor Andrew M. Cuomo)

There is a sudden new source of money in New York that is getting little attention in the debate about where the MTA will get resources to fund the ambitious plans to solve its problems, let alone just manage to keep the mass transit system going. That source is the big corporate income tax cuts just enacted by the federal government that have put billions - yes, billions - of dollars into the hands of New York businesses and their owners.

There are several reasons why tapping this resource makes sense. First, the size of the cash savings to New York businesses is so large that utilizing even a billion dollars a year would just be a portion of the money newly sitting in corporate pockets, even if restricted to businesses in the New York City area. Second, unlike individual income and property taxes, business taxes remain fully deductible at the federal level. Third, the mass transit systems that deliver millions of workers to these businesses are the lifeline for that wealth, and the state’s businesses should participate in a responsible effort to address this issue, as they did in 2008 when New York business leadership supported a payroll tax.

Still, Congestion Pricing Must Stay on The Table
Consideration of this revenue source is by no means intended to exclude congestion pricing, which will return to the table early in 2019, during state budget negotiations. The truth is that the MTA needs twice as much, or more, than the revenue congestion pricing can deliver. The congestion pricing plan developed by the “Fix NYC” panel put together by Governor Cuomo includes a Manhattan business district entry fee that would total about $1 billion a year (excluding the new taxi/app-vehicle tax, which was enacted). But to pay for the MTA’s current capital plan, and then pay for the new “Fast Forward” plan put forth by MTA New York City Transit President Andy Byford on top of it, will require double the size of the congestion pricing fee, and more.

The MTA itself made the case at its end-of-July board meeting. The presentation of the July 2018 MTA Financial Plan update and the 2019 Preliminary Budget began with this overriding statement: “As stated in the November and February plans, the MTA requires new sources of sustainable revenue for operations and capital.”

The board heard the dry numbers that predicted growing operating deficits from 2020 to 2022 despite 4% fare and toll hikes in 2019 and 2021. The deficit is projected to be $200 million in 2020, $400 million in 2021, and $600 million in 2022. A few weeks before the board meeting, Governor Cuomo reiterated his support for congestion pricing and said the MTA needed $37 billion, the necessary portion of which he proposed the state split with New York City. This is political rhetoric. Neither Cuomo nor de Blasio wants to divert resources from their budgets to provide steep new revenue sources to the MTA. New sources of money are required.

The MTA’s Problem
The main problem with paying for mass transit is the MTA capital budget. The MTA can manage to cover the expenses of its operating budget within the constraints of fares, tolls, and dedicated taxes, but not its capital budget.

The money needed to replace track, stations, rolling stock, legacy signals, advanced signals, the expansion projects, and more requires external funding sources. The capital budget needs government grants and/or borrowed funds. Borrowed funds means paying interest, and that is a major, growing issue. When you need $37 billion, and most of it won’t come from grants, that’s a lot of borrowing and a lot of interest to pay. Congestion pricing is a necessary and essential step - but the billion dollars a year from it can pay interest on only $12 to $15 billion worth of borrowed funds. That means you’re not even halfway to $37 billion.

How much new cash is businesses in New York saving from the federal income tax cuts? The New York State Tax Department knows the answer because New York’s corporate income tax is computed using the federal corporate income tax as the starting point in a business’ own New York tax filing.  It will take some time to get that answer, so some back-of-the-envelope calculations are in order.

How Much New Money Is Available?
The New York State economy is 8% of the nation’s Gross Domestic Product. Federal corporate income tax receipts in fiscal year 2017 (before the Trump-led cut) were approximately $300 billion. New York’s contribution to the federal receipts can be simply computed at 8% of that, or $24 billion. The federal corporate income tax just got cut 40%, going from 35% to 21%, 14 full percentage points. Federal tax savings have therefore put about $9.6 billion in new cash annually into the pockets of New York corporations, not adjusting for year-to-year fluctuations. How much of that is in the MTA region -- New York City and its suburbs?

A  study of New York’s regional tax and spending distribution was conducted by the Rockefeller Institute in 2011 using the state’s 2009-2010 fiscal year. That study showed that 89% of the bank income tax, and 79% of the corporate franchise tax, came from New York City and its suburbs. The figures are higher now because economic activity has become even more concentrated downstate since 2009. An estimate that close to 85% of the corporate profits taxes come from downstate is reasonable, meaning roughly $8 billion a year in new money to the region’s businesses from the federal reduction.

Some of this money is not New York taxable income -- New York tax law counts out profits from sales of products and services outside New York pursuant to a formula -- but a very large proportion is New York profit. Maybe half? The New York Tax Department knows the answer.

A surcharge on corporate tax liability related to New York corporate taxable income has been in place since the first MTA bailout put together by Governor Carey and the Legislature in 1982. Today it yields $1.2 billion in dedicated tax revenue to the MTA as part of the Metropolitan Mass Transit Operating Assistance Account (MMTOA). This is New York’s own tax, not related to the new cash from the federal tax cut. But the fact is that New York State has been taxing corporate profits for the MTA for 35 years.

New York business leadership proposed a payroll tax in the MTA district in 2008 and it was enacted in 2009. The tax was unpopular, especially in the New York City suburbs. Governor Cuomo later scaled back the payroll tax in 2011 to exempt smaller businesses and organizations. It is still a major source of money for the MTA, but a separate New York 2014 corporate tax cut resulted in unexpected revenue losses for the state as a whole.

New York’s Own Corporate Tax Cut Problem
In 2014 Governor Cuomo proposed cutting the state corporate income tax from 7.1% to 6.5%, as well as merging the corporate franchise and bank income taxes. The merger was supposed to be revenue neutral. The Legislature approved the proposal and added a repeal of the corporate income tax on New York manufacturing. Something has since gone wrong from this change. New York’s corporate income tax revenue has declined precipitously since 2015.

(in billions) FY 2013 2014 2015 2016 2017 2018
Corporate Franchise Tax 3.009 3.812 3.548 4.527 3.166 3.08
Bank Tax 1.912 1.05 1.536 121 389 467
Total 4.921 4.862 5.084 4.406 3.555 3.547

The State Division of the Budget explained the sharp drop off in revenue from the combined corporate franchise and bank taxes from overpayments in 2015. But the drop off is steep: $1.3 billion, or 28%, for 2018 compared to back five years ago in 2013, before the reforms were enacted. The result of the reform was serious revenue losses.

Regardless, mass transit is in crisis and there are many, many billions of new dollars from the federal corporate tax cuts. And some New York profits that had been taxable seem to have fallen off the table since a flawed reform in 2014 as well. These corporate tax savings ought to contribute to the mass transit solution.

Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

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Federal Corporate Tax Cuts Just Gave New Billions to New York Businesses - What About the MTA? Sun, 12 Aug 2018 04:00:00 +0000
Molinaro Starts Campaign on Attack, Policy Plans to Come marc molinaro twit

Marc Molinaro, left (photo via @marcmolinaro)

Nearly three months after launching his campaign for governor, presumptive Republican nominee Marc Molinaro has spent most of his time hammering incumbent Andrew Cuomo, a two-term Democrat, on ethics scandals, economic development spending, and other issues. But key questions remain about Molinaro’s own policy stances.

“I know that campaigns are marathons, not sprints,” he recently told Gotham Gazette, after participating in a rally in support of keeping the single-test admission system to New York City’s specialized high schools, when asked for more detail about his education platform.

Molinaro, the Dutchess County executive, talked broadly about investing in communities, empowering teachers, and focusing on early interventions, but said New Yorkers would have to wait for more specifics.

“I can” go into more detail, he said with a half-laugh, “but I won’t.”

That sums up the state of the Molinaro campaign. He has offered a handful of policy planks, mostly around government ethics, and promised “bold” plans that will challenge entrenched interests and help make New York more affordable for homeowners.

As July approaches, the candidate certainly has time to roll out his policy agenda, given he has no primary to worry about and needs to earn votes for November, when he will appear on the ballot on three party lines: Republican, Conservative, and Reform. But what policies will he run on? What does Molinaro need to do to rally the GOP base while also appealing to independents and moderate Democrats? And, how can he overcome the Democratic enrollment advantage in New York in an election that will be, in part, a referendum on President Donald Trump?

Fiscal conservative
Like any Republican candidate for statewide office, Molinaro faces major obstacles from the outset. There were more than twice as many Democrats as Republicans in New York as of April, with Democrats also outpacing Republicans in registering new voters. And Cuomo’s record, which includes some centrist and crossover legislative and budgetary achievements, makes it hard in some cases for any Republican to carve out turf that’s right of the two-term incumbent, but not so far to the right that he or she alienates too many New Yorkers.

Thus far in the race, Molinaro has focused on traditional Republican themes of cutting taxes and reducing government spending.

“If taxing and spending were the best way to lift families out of poverty, we’d have the best government in the country and I wouldn’t be running for governor,” he said in his May 23 Republican nomination acceptance speech. “Overtaxing and overspending -- it’s a dream-killer, a job-depriver. It robs working people from the ability to save.”

Molinaro has come out in favor of extending the state’s property tax cap, instituted under Cuomo, and recently called for the so-called “millionaires’ tax” to be phased out.

Since 2012, the governor and legislature have limited increases to property taxes levied by localities and school districts to 2 percent of the previous year’s rate or the rate of inflation, whichever is lower. Bigger hikes to bolster school districts can be made if 60 percent of voters in those districts approve of them; there’s also a provision for localities to make bigger hikes. New York City is exempt from the cap, something Republicans from the city and beyond have criticized.

As for the income tax rate for the top bracket -- 8.82 percent for individuals making $1 million or more and couples earning $2 million or more per year -- Molinaro wants “to have it expire over time.” The rate went up, from 6.85 percent, in 2009. Molinaro declined to state what rate he would seek for the state’s highest earners.

On sports betting, legislation to legalize that form of gambling has stalled in Albany as lawmakers debate fees. But Molinaro has called for an 8.5-percent tax on sports betting if it does become legal.

E.J. McMahon, research director of the Empire Center for Public Policy, pointed out questions Molinaro needs to address about his tax plan.

McMahon said making the property tax cap permanent could hinge on just how Molinaro would phase out the millionaires’ tax.

“You’ve gotta decide what you’re going to do with that before you decide anything else that has financial impact,” McMahon said.

There’s also the question of how much political capital Molinaro would invest in perpetuating the property tax cap. McMahon noted that Cuomo and Republicans who control the state Senate say they support the move, but have not yet made it a top priority. The cap is set to expire in the 2019-2020 fiscal year.

McMahon said Molinaro could signal his support for the property tax cap by making it his sine qua non for passing the state budget.

“Will he say…this is going to be a condition for a budget or any extension of rent regulation?” McMahon said, referring to a top priority for Democrats who control the Assembly by a wide margin dominated by New York City members. “The question is, what is going to be your priority, what are you going to do to make it happen?”

Trimming the fat
Along with criticizing state taxes in his Republican Party nomination acceptance speech, Molinaro promised a new approach to budgeting for government agencies. He said he would recruit “the best and brightest” from colleges and businesses to audit state government, and promised “zero-based budgeting” in which “no agency gets a dime until it can show we’re getting what we pay for.”

“What we have now is an outmoded, outdated, and antiquated 20th-century state government at its worst,” Molinaro exclaimed.

Erie County Republican Committee Chair Nick Langworthy, who has met with Molinaro to strategize on the election, suggested that cutting government spending could resonate with voters.

“He needs to address the out-of-control spending of the state and the out-of-control taxes. How does he make it better?” Langworthy said.

“I think he will have some bold proposals, from some of our private conversations, coming forward that probably will shake some of the vested interests to their core,” he added.

The devil is in the details, of course.

“He basically talked about waste and fraud,” McMahon said. “Until you know what he’s talking about, you don’t know whether there’s anything there or not.”

McMahon pointed to the state police barracks in New York City as an example of the kind of expenditure that Molinaro could target for cuts.

“There’s a few million bucks,” McMahon said. “A few million here, a few million there -- next thing you know, we’re talking real money.”

In a recent phone interview with Gotham Gazette, Molinaro shied away from specifying how he would trim the now-$168 billion state budget.

Political scientist Richard Flanagan said the candidate could make waves by completely scrapping state investment in economic development.

“He might say, ‘I’m a free market conservative and I can’t pick winners and losers. Markets pick winners and losers,’” said Flanagan, who chairs the College of Staten Island’s political science department. “That would be a bold break from the New York way. It might appeal to New Yorkers.

“It’s a different approach from what Cuomo’s been doing,” Flanagan said.

Indeed, Molinaro recently pledged that if he is elected governor, there will be no direct subsidies paid by government to private businesses, though he stopped short of saying he would end economic development programs. Those can include measures such as tax breaks, tax credits, space allocation, and public-private partnerships.

Action on ethics
Often in the same breath Molinaro has criticized state spending, he’s blasted Cuomo for alleged ethical improprieties, connecting the two through an alleged pay-to-play culture, where donors to the governor’s campaign are rewarded by government action. Both Molinaro and Democratic primary challenger Cynthia Nixon are trying to persuade voters that the corruption trials of members of Cuomo’s inner circle make the incumbent unfit for office. The governor’s former top aide, Joseph Percoco, was convicted of fraud and soliciting bribes in March; and Alain Kaloyeros, the mastermind behind many of Cuomo’s biggest development projects, is now on trial for corruption-related charges.

“What’s out? Cuomo’s multibillion-dollar pay-for-play giveaways -- gone, yesterday!” Molinaro said in his GOP nomination acceptance speech. “Corporate welfare -- gone, yesterday! We’re going to make New York attractive to all businesses.”

Molinaro, a former state Assemblymember, has proposed a two-term limit for governor, lieutenant governor, state attorney general and state comptroller -- a rebuke of Cuomo as the incumbent seeks a third term. Molinaro says term limits would mark “a long-overdue start to restore honesty and integrity to state government.” He has pledged to serve only two terms if elected, even without a law in place.

The Republican challenger has also called for a ban on campaign contributions from people and organizations with business before the state; and supports closing the so-called LLC loophole, which lets companies or individuals make virtually unlimited campaign contributions through limited liability corporations, but saying it must be done as part of comprehensive reform, indicating he favors limits on other entities like labor unions. Cuomo has voiced support for closing the loophole in the past -- notwithstanding the fact he is the state’s largest beneficiary of donations from LLCs. Cuomo has neither advanced the legislation nor voluntarily shut down his campaign’s access for LLCs, something Nixon has done.

Recently, Molinaro said the Joint Commission on Public Ethics had “no integrity” as it cleared former Cuomo administration official Sam Hoyt of sexual harassment and assault. Molinaro and others pointed to the fact that JCOPE’s executive director, Seth Agata, is the third consecutive person with close ties to Cuomo to head the commission.

Molinaro is making his case for reforms as 46 percent of voters statewide say corruption is a “very serious” problem, according to a February Quinnipiac University poll. But skepticism of reform proposals seems high; 62 percent of voters thought ethics laws included in the 2015 state budget would have no effect on reducing corruption.

“I don’t think he’s going to win the election on ethics reform,” Republican political consultant John William Schiffbauer said of Molinaro. “New York voters are so desensitized to the idea of political corruption, unfortunately, that it’s just not the single issue that I think it should be.”

Schiffbauer added that many upstate voters already view Cuomo as ethically compromised. He said Molinaro’s challenge will be persuading residents of New York City, Westchester County, and parts of Long Island.

“Those are always historically areas that have high numbers of registered Democrats, who generally just always vote Democrat,” Schiffbauer said. “That’s where he’s going to need to be selling that most. Or selling it like: Cuomo has dropped the ball, he’s let you down.”

People living with disabilities
Other than talking tough on budgeting and corruption, Molinaro regularly brings up his experience as the father of an autistic daughter on the campaign trail, a campaign he launched as county executive, and the notion that New York must become a more compassionate, inclusive place.

“We are going to reset New York’s priorities,” he said in his nomination acceptance speech. “Children and adults with disabilities, seniors without savings, classroom funding and special education, opioid addiction, safe drinking water, signal switches in subway tunnels -- those are the kinds of things that’ll move New York forward.”

He told Gotham Gazette he would push every executive agency to update its policies for people with intellectual and developmental disabilities, though he declined to provide details.

Molinaro pointed to a program he created in Dutchess County, called ThinkDIFFERENTLY, as an example of his approach.

The program, marked by a resolution of inclusive principles, has hosted free movie events and annual picnics where service providers can connect with people with disabilities. The county’s related “Think Ahead” program, a partnership with Dutchess Community College, has provided job preparation and life skills training for people with intellectual and developmental disabilities, according to the Molinaro campaign.

Schiffbauer noted the issue could help distinguish Molinaro from his rivals.

“It’s an issue that you really haven’t seen many people talk about in New York state and city,” he said, adding that the candidate’s experience as a father could make the issue come to life for voters. “He’s not bringing it up just to bring it up. He’s always talking about this issue.”

Fixing the MTA
In his interview with Gotham Gazette, Molinaro sought to stake a claim in the red-hot MTA debate by noting the authority’s service -- specifically, the Metro-North Hudson Line -- extends through his county, where he often says upstate and downstate meet.

He outlined changes he would make to the authority’s structure, calling for the board to get the power to fire its chair, a governor appointee.

While new MTA New York City Transit President Andy Byford has promised to make accessibility one of his main priorities, Molinaro also called for increased services for people with disabilities.

“I know it’s something that he’s going to take on,” said Langworthy. “He’s going to show that the money has been wasted. He’s going to have proposals to fix it.”

Molinaro promised as much in the interview, but asked whether he’d be willing to increase spending to help disabled people use the MTA, he demurred.

“My basic philosophy is make government as effective and efficient as possible,” he said. “I don’t subscribe to the [idea], ‘Well, we always have to spend more money to achieve something.’”

Molinaro also declined to comment on Byford’s multibillion-dollar plan to fix service, which has drawn support from Cuomo. Nixon released her own subway plan at the end of last month, which is supportive of the Byford plan, but includes several mechanisms to pay for it and long-term funding of the MTA, something Cuomo has not figured out yet, though he continues to promise to pursue congestion pricing next year after he was unable to push it through the Legislature in the recently-ended session.

Molinaro has not outlined his plans for funding the MTA’s long-term capital needs.

Jails and justice
The national debate on criminal justice reform has played out in the Democratic primary, with Nixon apparently pushing Cuomo left on legalizing marijuana. Before campaign season, Cuomo announced proposals including the elimination of cash bail, speeding up trials, and fixing or closing substandard jails, but he has not won passage of any of those measures.

Gerald Benjamin, a political scientist and director of the Benjamin Center at SUNY New Paltz, said Molinaro could play his criminal justice record in Westchester County to his advantage.

The Republican has spearheaded the creation of a jail to replace the overcrowded facility there. He launched the initiative before a state government report ranked the old jail as one of the worst in New York.

While the project does not necessarily symbolize legislative reform, it speaks to management and budget decisions, and Benjamin said Molinaro’s effort to tackle the issue could earn him points.

“He took that issue on, which previous county executives hadn’t done,” said Benjamin, who co-authored a 2011 policy paper on jails in the Hudson Valley. “It was a costly choice and he took it on in a just-right way from a public policy perspective.”

Molinaro has not made clear where he stands on issues reducing or eliminating the use of cash bail for most non-violent offenses, an issue that has some bipartisan support, and he has not indicated that criminal justice reform will be a focus of his campaign.

The Trump factor
As the general election approaches, the Democratic gubernatorial nominee, whether Cuomo or Nixon, is likely to tie Molinaro to President Donald Trump. Molinaro will also be asked to weigh in on Trump policies, statements, and controversies, though he is already loathe to do so, preferring, like some other Republican candidates around the country, to keep the focus on his race and platform.

Cuomo and his representatives have repeatedly labeled Molinaro as a “Trump mini-me” and a conservative opposed to LGBT and immigrant rights, as well as other progressive principles.

Molinaro says he did not vote for Donald Trump for president, claiming he instead wrote-in former upstate Republican Rep. Chris Gibson.

But Flanagan, of CUNY’s Staten Island college, said that stance might backfire.

Being ambivalent about Trump might alienate the president’s supporters while failing to win over any Democrats. Molinaro recently said he does not favor the Trump policy of separating immigrant families at the border, and has previously criticized the president’s “both sides” response to a white nationalist rally in Virginia and the Trump tax reform’s low threshold for state and local tax deductibility. On the latter point, however, he has also faulted Cuomo and Democrats for policies leading to New York’s high tax burden on income-earners and homeowners.

Flanagan said members of Trump’s base on Staten Island might think, “He didn’t like Trump? Forget him; I’ll vote for Cuomo.”

Conservatives interviewed for this article illustrated how tricky it will be for Molinaro to stake out his position in relation to the president.

Langworthy voiced disgust at the “mini-Trump” characterization.

“It is just infantile,” he said. “If that’s [Cuomo’s] message, he should be ashamed of himself.”

State Conservative Party Chair Mike Long, whose party has endorsed Molinaro, said the gubernatorial candidate should embrace Trump’s economic policies.

“You have to do something similar to what Donald Trump has done as president of the United States,” he said. “Look at the outcome with him - he’s already created tremendous growth in our nation...That’s what has to be done in the state of New York.”

Fighting a centrist
Flanagan pointed out several areas where it will be difficult for Molinaro to distinguish himself from Cuomo without going too far to the right.

Perhaps no issue is more challenging for a New York Republican trying to win statewide than gun control. Cuomo’s legislation to expand the state’s assault weapons ban, among other measures, is hugely popular in New York City, and gets a small plurality of supporters upstate. But there are parts of the state that are heavily Republican and ardently opposed to the Safe Act, again begging the question of how Molinaro locks up the base while appealing to suburban moderates.

Flanagan said Molinaro could chart a new course by “artfully” arguing for a system in which localities determine new gun regulations.

“I do have concerns with how aggressive this governor has been,” he previously told Gotham Gazette. “I think in some ways irresponsibly ignoring those that do support, as I do, the Second Amendment and forcing legislation without having the kind of local robust conversation necessary. I believe the constitution is as it’s written.”

On education, Flanagan said, Molinaro could argue for more charter schools, though it would be tough for him to distinguish himself from Cuomo, a strong supporter of charters who has secured a variety of legislative and budgetary victories for the growing sector. Flanagan also said Cuomo’s failure to deliver on promises of universal pre-K for the state could be open to criticism from the Republican candidate.

“Somehow this guy needs to get the independent voters,” Flanagan said of Molinaro. “[Universal pre-K] may be an issue where he could engage the independent voters without getting a lot of backlash from the Republican base.”

Conservatism and charisma
It is difficult to say what lessons previous Republican runs for governor might hold for Molinaro. In 2014, Cuomo handily defeated Rob Astorino, a county executive from just north of New York City who ran on a campaign opposing Cuomo’s gun-control measures and ban on hydraulic fracking. Astorino’s gun control pitch didn’t work, and fracking has largely fallen out of the headlines.

The last Republican to become governor, George Pataki, ran on promises of an across-the-board tax cut to unseat Cuomo’s father. But the campaign came during the nationwide “Republican Revolution” of 1994 -- a vastly different climate compared to Trump’s first term. Pataki did win three terms, though, and, when introducing Molinaro at the Republican state convention, said he sees parallels this year to his initial, surprise victory over an incumbent Cuomo.

Which issues beyond the initial list he has offered -- taxation, state spending, unfunded local mandates, cutting business regulations, government ethics and campaign finance reform, MTA management reform, and better accommodations for people with disabilities -- Molinaro will prioritize and put forth detailed policy plans for is to be seen. It is clear a main focus will be highlighting that he is not Governor Cuomo.

Molinaro’s campaign might come down to banking on incumbent fatigue, conservative nostrums, and personal charm -- the Republican candidate’s charisma helped him become mayor of Tivoli at age 19, and he has maintained a career in politics ever since.

“I just haven’t heard a bold new idea,” Flanagan said of Molinaro. “It’s not like he’s the Jack Kemp of New York who sort of personifies a new third wave for the Republican Party or anything.”

by Shant Shahrigianh, Gotham Gazette

Read more by this writer.

Molinaro Starts Campaign on Attack, Policy Plans to Come Tue, 26 Jun 2018 04:00:00 +0000
On Taxes, the MTA and More, Molinaro Discusses Developing Campaign Platform marc molinaro launch

Marc Molinaro (photo: Ben Max/Gotham Gazette)

Ask Marc Molinaro about nearly anything, and the Republican nominee for governor will likely bring the conversation back to property taxes and affordability.

“My focus, ultimately, will be to drive down costs on middle class New Yorkers,” he said in a Wednesday interview with Gotham Gazette. “That focus, again, has to be on property taxes because New York, unlike every other state in America, forces more of its state spending on property taxpayers. Property taxpayers -- small tax base; large, acute burden on individuals with no respect to their ability to pay.”

Molinaro, currently Dutchess county executive, has repeatedly sounded the theme since formally launching his bid for governor April 2. While he has largely spoken in sweeping generalities -- promising “bold” proposals to come during his nomination acceptance speech at the May 23 state GOP convention -- details are starting to emerge.

Molinaro said that in addition to making the state’s 2-percent cap on annual property tax increases permanent, he would seek to phase out the so-called “millionaires tax” if elected. The income tax rate for the top bracket -- which includes individuals making $1 million or more and couples earning $2 million or more per year -- went from 6.85 to 8.82 percent in 2009, and has been extended by Democratic Governor Andrew Cuomo and a Legislature where each house is controlled by one of the two major parties.

“I would seek to have it expire over time,” Molinaro said of the millionaires tax. “I do think that there’s a way to make taxation in the state a bit more respectful of those who can’t afford it.”

He said he will release a detailed tax plan in the coming months. While Molinaro, like many other New York Republicans, has opposed the new, GOP-led federal tax overhaul because of its cap on local deductions, he has said New York must now work even harder to bring down the tax burden on its residents. He has also stressed that the state must reduce its burdens on localities -- often in the form of unfunded mandates -- so that counties, cities, towns, and villages can lower their taxes.

Molinaro, 42, has spent his entire career in politics, including terms as a member of the state Assembly and as mayor of Tivoli, where he became the youngest mayor in the country at age 19. He’s claiming the mantle of a regular New Yorker who gets the working and middle classes, comparing himself favorably to Cuomo and Cynthia Nixon, each of whom has much more wealth and fame. Molinaro’s tendency to talk at length about poor and struggling families in personal terms occasionally makes him sound more like a progressive Democrat than a fiscally conservative Republican.

“As a kid, I grew up on food stamps. I’m very sensitive to how the state treats those who are on the lower end of the income scale, living maybe in poverty or subsidized housing,” he said. During his nomination acceptance speech he raised his voice in declaring the he would “not concede compassion to anyone.”

He has made the state’s struggling dairy industry something of a focus. He allocated $651,781 of Dutchess County’s 2017 budget to protecting two farms there. He has been photographed hanging out in stables and often tweets about dairy. “Dairy day. I love dairy day. I miss dairy day. I should come back to Albany for dairy day,” he posted on Twitter earlier this month, in lighthearted fashion, while he has also tweeted about serious policy to help dairy farmers survive, such as through reducing regulations and taxes.

On the state’s minimum wage law, Molinaro voiced opposition to the recent increases. In 2016, Cuomo and state legislators reached a deal raising New York City’s minimum wage to $15 by the end of this year, with slower hikes in other parts of the state.

The Republican candidate, who also has the Conservative and Reform Party nominations, said he opposed the deal at the time and thinks the minimum wage “should be indexed to ebb and flow with the cost of living.”

“I also don’t necessarily agree that an unelected board of individuals should be able to establish statewide policy,” he added, in reference to the wage board that Cuomo had empaneled to help him craft the policy before he pushed it through the legislative process. “Those are decisions that ought to be made by citizens and their representatives.”

Asked whether he thought the state’s minimum wage should be lowered given broad economic growth, Molinaro replied with a laugh, “I’m not going to go there.”

The MTA is another area where Molinaro said he will roll out detailed proposals.

He said his priorities would be “depoliticizing” the authority’s board by giving members the power to fire the chair, currently Joe Lhota, along with conducting a thorough review of the MTA’s assets and creating a “road map” to improve service.

“Like Joe Lhota or not, the governor has too much influence,” Molinaro said, nodding to the fact that the governor nominates the MTA board chair, as Cuomo did with Lhota. “Far too many decisions are made without input from the MTA board…I would absolutely want to empower the MTA board to be able to fire the head of the MTA.”

Molinaro’s county includes the far reaches of the MTA transit system, and he is one of the executives empowered to jointly appoint an MTA board member. He often says that Dutchess is where “upstate meets downstate” and has joined the chorus of candidates and others criticizing Cuomo’s management of the MTA, especially the New York City subway system.

Molinaro did not comment, when asked, on MTA NYC Transit President Andy Byford’s new plan to fix service. He mostly spoke in broad terms about the MTA’s problems -- decrying its “ineffectiveness and erosion” -- but singled out service for people with disabilities as a priority.

“The fact is that if you are living with a disability or particular challenges -- special needs -- we don’t have adequate access, and that needs to be a priority regardless of where you live,” Molinaro said.

That belief connects to an initiative Molinaro launched in Dutchess -- which he made a point to again emphasize during the interview -- to improve services for people with intellectual and developmental disabilities. The program, called ThinkDIFFERENTLY, has featured events connecting people with disabilities with service providers and aims to help them develop job and life skills.

Molinaro said the program -- which has caught on in dozens of other localities -- would provide a paradigm for how he approaches disabilities as governor. Molinaro, whose daughter is autistic, often cites his experience as a father when discussing the issue.

“Whether it’s making the investments necessary to break down physical barriers -- making subway stops and platforms accessible -- or it’s saying to job creators, you need to do more to encourage employment for those living with disabilities or welcome those with special needs as consumers,” he said, “we need to educate and then we need to ensure that the system is easier to navigate.”

As might be expected for a relatively unknown Republican challenging a two-term Democratic governor in New York, Molinaro has trailed Cuomo in early polls. A Siena College poll released Wednesday, about five-and-a-half months before Election Day, showed Cuomo ahead of Molinaro 56-37, though the numbers showed an improving trend for Molinaro in the hypothetical matchup and the poll was celebrated by his campaign, which noted he is in better position than Republican challenger Rob Astorino was four years ago at the same time.

Like Democratic primary challenger Nixon, who also trails Cuomo in the polls, Molinaro has tried to put a dent in the governor’s numbers by tying him to corruption. Both challengers have pointed to the recent conviction of longtime Cuomo lieutenant Joseph Percoco and the upcoming federal trial of Alain Kaloyeros, the former president of SUNY Polytechnic Institute who oversaw some of Cuomo’s most ambitious development projects.

Those cases center upon proven and alleged abuses within the governor’s multimillion-dollar economic development programs, and the Percoco trial showed the former Cuomo government aide and campaign manager regularly using his executive chamber office while on leave to run the governor’s 2014 reelection campaign. Molinaro has put forth a variety of government ethics and campaign finance reform proposals thus far, some of which Cuomo has professed support for but not passed. The GOP nominee has said he would seek pay-for-play, or doing-business, campaign finance restrictions on entities seeking or holding state contracts, term limits for statewide elected officials and state legislators, and other changes to make government more honest and open.

Molinaro said the trials not only show issues of corruption under Cuomo’s nose, but that the governor’s approach to economic development is fundamentally flawed.

“I don’t believe the government should take taxpayer money and give it to private interests,” he said. “I don’t believe in cutting checks as if New Yorkers are [Cuomo’s] personal ATM. It’s not fair, it’s not appropriate and he doesn’t seem to know the difference between right and wrong.”

Asked how he would encourage statewide economic growth if he ended Cuomo’s development programs, Molinaro again pointed to tax cuts and lowering the cost of living.

“Drive down costs, make it easier for businesses to thrive,” he said. “That’s how you grow an environment that people can achieve greater success -- not by pickpocketing New Yorkers and giving it to political contributors.” Molinaro did not offer specifics.

He said that if elected, he would take a selective approach to Cuomo’s legacy, though he shied away from detailing what he would seek to undo. “My perspective is everything gets evaluated -- everything,” he said.

Molinaro did not answer a question about Cuomo’s gun control measures, including an expanded ban of assault weapons, known as the SAFE Act. While the governor has frequently touted the legislation as one of his main achievements, and New York City residents largely support it, it is considered highly unpopular upstate.

In a January interview, more than a month before the school massacre in Parkland, Florida and the movement it spurred, Molinaro had told Gotham Gazette, “Frankly, I do have concerns with how aggressive this governor has been. I think in some ways irresponsibly ignoring those that do support, as I do, the Second Amendment and forcing legislation without having the kind of local robust conversation necessary. I believe the constitution is as it’s written.”

The Cuomo campaign has seized on some of Molinaro’s more conservative positions, like on gun rights and his 2011 vote against marriage equality as a member of the Assembly, the passage of which is a top Cuomo resume item. Molinaro has said he has evolved on the issue. The governor’s campaign has branded him a Trump mini-me, though Molinaro has said he did not vote for the Republican president in the 2016 election.

In the Wednesday interview with Gotham Gazette, Molinaro did not list any other issue areas where he plans to roll out policy plans, though during his convention speech he appeared to promise a series.

Asked how, if elected governor, he would work with the state Legislature -- this fall, Democrats are likely to maintain their Assembly majority and Republicans are fighting against losing the Senate -- Molinaro said he would try to make the lawmaking process more inclusive.

He promised to end Albany’s “three men in a room” culture in which the governor and legislative leaders decide the budget and other important issues behind closed doors.

“I think the government can reach into the legislature and local communities to identify great thinkers, people who are engaged in trying to solve problems irrespective of party, and engage them,” Molinaro said. “That breaks down the power structure that has paralyzed state government.”

by Shant Shahrigianh, Gotham Gazette

Read more by this writer.

On Taxes, the MTA and More, Molinaro Discusses Developing Campaign Platform Thu, 14 Jun 2018 04:00:00 +0000
The Problem with Cuomo's Payroll Tax andrew cuomo excelsior

Gov. Cuomo (photo: Kevin P. Coughlin/Governor's Office)

Other high-tax states have considered it, but New York just became the first state to actually do it:  revamp its tax code to mitigate the new $10,000 federal cap on deducting state and local taxes (SALT). As part of the new state budget, the Legislature enacted the Governor’s plan for a new voluntary 5% payroll tax New York employers can opt into. It would exempt their employees from paying state income tax, and thereby help keep them below the federal cap.

But the new payroll tax has many detractors, including the New York Business Council, which called many of its provisions unworkable, the New York chapter of the National Federation of Independent Business, which said its members feared it sets the stage for a tax hike on small businesses, and experts convened by the Manhattan Institute, who point out it will penalize commuters from New Jersey and Connecticut. Many predict that only a few small, well-heeled firms will be able to take advantage of it, and many worry the IRS will simply close down the loophole Cuomo just opened.

These objections are all well-founded, but there’s a bigger, more fundamental problem with the scheme: payroll taxes hurt job growth.   

In theory, employers who opt into the tax will be made whole because they can pass the cost onto workers by lowering wages 5%.  Workers will be made whole since they wouldn’t pay state income tax, and it would help them stay below the federal deductibility limit on SALT.  All together, it’s supposed to be a wash.

But in practice it doesn’t work that way. Wages are “sticky” and notoriously hard to pull back once workers attain a certain number on their pay stubs. In a large workforce, getting all employees to accept a nominal 5% pay cut will be a nightmare. Even for small firms with few workers, existing contracts, minimum wage, and competition for sought-after employees will bedevil an across-the-board pay cut. As the New York State Department of Taxation and Finance warned, if employers can't pass the full tax bill onto employees, their net labor costs go up. That drives hiring down.

The new payroll tax doesn't exist in a vacuum, but as part of the larger tax environment, which includes high federal payroll taxes that already inhibit job and economic growth.  

They are the biggest taxes a large majority of Americans pay, and the most regressive, squeezing workers who don’t earn enough money to pay income tax or benefit from income tax cuts. Paying payroll taxes lowers workers’ earnings and curtails consumer spending and economic growth. Even so, Congress refused to cut them when it cut federal income and corporate taxes (though Senators Lee and Rubio tried).    

Federal payroll taxes also distort relative prices of labor versus. non-labor inputs to business (energy, materials and land) making hiring artificially expensive and consumption artificially cheap.  The distortion amounts to over $1 trillion a year (the amount federal payroll taxes raise), or about 5.4% of GDP.

That’s a big, structural drag on jobs that has resulted in a big, structural (though largely hidden) overhang of joblessness. There’s a shocking fact hiding in plain sight in the rosy Bureau of Labor Statistics unemployment charts: out of 257 million non-institutionalized American adults, over 100 million don’t have jobs.

Of those, 95 million aren’t counted as “unemployed;” they’re just considered outside the workforce.  That’s legitimate for people who are retired, or who aren’t able or don’t chose to work. But many tens of millions of them, including millions in New York, aren’t working because they lack job opportunity, due in significant part to the corrosive effects of payroll taxation.

To whatever extent firms adopt it, New York's new payroll tax will only compound these problems.

Instead, payroll tax should be cut to boost jobs, both at the federal and state levels, like Colorado did. Since 2008, Colorado’s Job Growth Tax Credit has refunded state payroll tax for job creating businesses. It brought thousands of high-quality jobs to the state and grew its tax base.  

Revenue lost from cutting payroll taxes could be replaced with non-labor taxes on resource consumption, waste, inefficiency and pollution. That’s a tax reform approach known as payroll tax shifting. According to the bipartisan group Get America Working!, which I advise, it would reverse payroll tax’s longstanding distortions, roughly doubling the job-creating effects of cutting payroll taxes alone, creating tens of millions of jobs nationwide. In New York, non-labor taxes on consumption we want to limit could raise state revenues and fund tax relief for individuals hurt by the federal deductibility cap.

Which non-labor taxes exactly is a topic for the next budget debate. But there is no lack of options. How about getting serious about collecting the 20% of New York sales tax that still goes unpaid? Or adopting real congestion pricing instead of the quarter-measure in this year’s budget?  Or considering the state carbon tax designed by NYRenews that would raise $7 billion annually, help meet New York’s climate goals, and stimulate renewables sector jobs?    

New York’s new payroll tax is aimed at downstate, high-paying firms. It might or might not help a narrow band of them at the cost of undercutting job growth. But New York needs a tax policy that boosts employment statewide, including upstate. That’s why we need a tax overhaul that takes the burden off employment and puts it on harmful consumption, waste and pollution.

Stephen Kent is president of the public interest PR practice KentCom LLC and consults for the bipartisan employment policy group Get America Working!

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The Problem with Cuomo's Payroll Tax Mon, 09 Apr 2018 04:00:00 +0000
What's The [Data] Point? $9.5 Billion, with Andrew Rein whats the data point

What's The [Data] Point? Episode 34 -- $9.5 billion with Andrew Rein [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

wtdp rein

$9.5 billion is the new Citizens Budget Commission estimate of the extra taxes New Yorkers will pay due to the cap on the state and local tax deduction, known as the SALT cap, enacted in the federal Tax Cuts and Jobs Act of 2017. The number comes from a new CBC report that looks at the federal tax reform -- which has serious implications for New Yorkers -- and what the city and state should do about it.

Andrew Rein led the writing of the report, which was influenced by a distinguished group convened by CBC right after the federal law was passed in December. Rein has had an amazing career in government, working in high-level positions at the city Department of Education and Department of Health, at the federal Centers for Disease Control and Prevention, and for some major health and healthcare organization.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

by Ben Max, Gotham Gazette

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What's The [Data] Point? $9.5 Billion, with Andrew Rein Sun, 18 Mar 2018 04:00:00 +0000
State Leaders Must Blunt Impact of Federal Tax Reform on New York Nonprofits and the People Who Rely on Us 37749459904 8287feee00 z

(photo via The Governor's Office)

The recently passed federal tax law will deepen inequality and jeopardize the health and wellbeing of families and individuals across our state. This legislation penalizes New Yorkers by capping the state and local tax (SALT) deduction and will create deficits that are likely to result in catastrophic cuts to the programs they depend on. These tax “cuts” will drive up the national deficit, which will then be cynically used as a rationale for slashing investments in critical programs such as food assistance, public housing, and affordable healthcare.

Our state leaders must take action to ensure that we can weather this storm.

Federal aid accounts for one-third of the New York State budget and directly accounts for 8-10% of the New York City budget. The state is already facing a deficit that will be exacerbated by any federal cuts to state assistance or Medicaid spending.  For example, homelessness is a major problem in our city and two-thirds of the New York City Housing Authority’s budget comes from federal aid. Cuts in aid to states would also have a significant impact on our children as 41% of the budget for the Administration for Children’s Services and 8% of the Department of Youth & Community Development funding comes from the federal government. Lack of funds at these agencies would impact foster care, adoption services, after-school programs, and Head Start. When direct aid is cut, families and individuals will rely even more heavily on nonprofit human services organizations. Our nonprofits deliver essential programs through contracts with city and state governments that support people through every stage of life, including early child education, elder care, shelter for people experiencing homelessness, job placement, and nutrition assistance. However, these government contracts rarely cover the full cost of providing services, which has resulted in a chronically underfunded sector.

At the same time, this federal legislation dis-incentivizes charitable giving.

Private fundraising has been an important (but insufficient) tool for filling the deficit that comes with government contracts. The tax bill raises the standard deduction, and with that increase many people will not itemize anymore, meaning that they will not see a tax benefit in making charitable donations. According to the Indiana University School of Philanthropy in a report commissioned by Independent Sector, 82 percent of charitable giving comes from people who itemize their tax return, and it is estimated that charitable giving will go down by about $13 billion.

Too many organizations are already at a breaking point. In New York City, 18% of nonprofit human services organizations are insolvent. This tax bill could push them over the edge at the exact moment when they are needed most. While we know this is a difficult budget year, given the deficit and uncertainty at the federal level, it is now more important than ever that we make sure our nonprofits are financially strong and resilient.

We are asking the state to make investments in our workforce and our infrastructure to ensure we are strong enough to continue serving communities well into the future. The underfunding of human services is not a new issue, but we need the Governor to lead in this area and 1) fund the minimum wage for human services workers contracted by the State, 2) continue the Nonprofit Capital Infrastructure Fund – a highly sought after grant program that assists nonprofits in making crucial improvements to their buildings and technology, and 3) fund a wage adjustment for a workforce that has gone without a salary increase in over eight years.

The Governor’s Executive Budget recognizes the federal threats to New York and includes an impressive agenda, which requires the close collaboration of human services providers across the state who are threatened not only by federal policies, but also by years of state policies and funding decisions that have jeopardized their ability to serve as anchors for their communities. Our organizations are dedicated to elevating the human potential of our families and communities, and we were gravely disappointed that some of our representatives did not act in the best interests of our state in passing this damaging tax legislation. However, New York now has an opportunity to be a progressive leader for the country by making investments in the human services sector. In times of challenge and uncertainty, nonprofits are our communities’ first line of defense and careful planning and adequate financial resources from the city and state are needed to protect these essential services.

Center for New York City Affairs
Fiscal Policy Institute
Human Services Council of New York
United Neighborhood Houses

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Note: this column has been updated to correctly identify Independent Sector as the funder of the Indiana University study, not the United Way as originally written.

State Leaders Must Blunt Impact of Federal Tax Reform on New York Nonprofits and the People Who Rely on Us Sun, 28 Jan 2018 05:00:00 +0000
What’s The [Data] Point? $14.3 Billion, with Robert Mujica and Dean Fuleihan whats the data point

What's The Data Point? Episode 28 -- $14.3 Billion, with Robert Mujica and Dean Fuleihan [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

robert mujica cbc panel jan23

State Budget Director Robert Mujica and New York City First Deputy Mayor Dean Fuleihan spoke at a CBC event on Wednesday, January 24 to discuss the implications of the recently-passed federal tax reform on the state and city. Mujica and Fuleihan discussed how the state and city are responding, with a great deal of budget fallout to come. Ben and Maria were there and provide an intro and brief discussion of the speeches, and this episode then brings you the full remarks from Mujica and Fuleihan, with enlightening audience Q&A after each. You can also catch the video of the entire event, which included two-panel discussions, at the CBC website.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

by Ben Max, Gotham Gazette

Read more by this writer.

What’s The [Data] Point? $14.3 Billion, with Robert Mujica and Dean Fuleihan Thu, 25 Jan 2018 05:00:00 +0000