State Budgets

State of the State: New York

Governor Andrew Cuomo’s sixth regional State of the State address provided plenty to chew on for New York taxpayers. Despite acknowledging the need for tax relief and controlling spending, Governor Cuomo also proposed increased infrastructure spending along with picking winners and losers through tax incentives and a plan to purchase expensive equipment exclusively from American corporations. These proposals will not improve New York’s dead last economic outlook.

In regards to spending, Governor Cuomo proposes the largest infrastructure spending in state history at $100 billion. These projects include initiatives such as $10 billion for a “new John F. Kennedy airport” and $2 billion for water treatment for local communities. Another large spending item is the second phase of Governor Cuomo’s “Buffalo Billion” proposal, which allocates $500 million for economic development projects in the Buffalo region.

Governor Cuomo also proposes tuition-free college at SUNY and CUNY schools. To qualify, families must reside in New York and have an income of up to $100,000. During the second year of the program, families that make up to $125,000 would qualify. Furthermore, students must take 15 credits per semester. But “free” tuition may not be the best option for New York families. As Catherine Hill, president and professor of economics at Vassar College, explained, “If the revenue is not replaced, free tuition means fewer resources to teach students. Unintended consequences could include reductions in need-based financial aid, which would harm the low- and middle-income students free tuition is meant to help.” All New York students need an excellent, cost-effective higher education system that prepares them for the workforce. Smart higher education reforms, such as the solutions listed in the ALEC’s 10 Questions Legislators Should Ask About Higher Education, are a good place to start.

Unfortunately, New York continues to use tax incentives as a flawed economic development strategy. The governor offered a generous $30 million incentive package to encourage a company to move to New York and “create” over 250 jobs. That is an estimated cost of about $120,000 taxpayer dollars per job. According to The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth, tax carve-outs hinder economic competition and stifle innovation. Broad-based tax relief can improve the Empire State’s economic climate for all businesses.

Of special note is a plan Governor Cuomo stated to expand the requirements of the state’s “Buy American provisions.”  This would expand it to all procurements in excess of $100,000. While this may help some American businesses, this form of protectionism fails to account for extra cost passed on to New York families. These tax dollars could have remained in the able hands of New Yorkers to generate economic growth through private saving and investing. Recognizing that it is the governor’s place to use New Yorkers’ tax dollars efficiently, the governor should seek to procure the necessary equipment for the state at the best price possible, rather than currying political favor at the expense of hard-earned taxpayer dollars.

Governor Cuomo correctly noted that the tax burden on New Yorkers is still too high. He proposed doubling the state’s Middle Class Child Care Tax Credit. The governor also proposed a plan for local governments to reduce the property tax burden on taxpayers. He encouraged county executives to coordinate with local governments in order to reduce costs and develop cost-savings plans. These cost-saving plans would then be submitted to taxpayers would in a referendum in the November 2017 election.

Other proposed positive reforms included allowing ridesharing throughout the state instead of only in select regions. Also, Governor Cuomo’s discussion of important issues such as tax relief certainly is encouraging. However, picking winners and losers with taxpayer dollars and increasing spending will not help New York’s economy thrive. Instead, legislators should focus on a continued reduction of the state’s burdensome corporate and personal income taxes. An unshackling of the ingenuity and dreams of New Yorkers will fuel a better life for all.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

+ State Budgets In Depth