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Cuomo plans overhaul of state tax codes, will sue to block federal bill

ALBANY — In his longest State of the State speech, Gov. Andrew M. Cuomo Wednesday offered a toned-down plate of major spending ideas, but used an election year to ratchet upward his attacks on President Trump and Republicans who control Congress.

The 92-minute address to both houses of the state Legislature, heavy on prose, made no bold pronouncements for historic spending initiatives, as Cuomo did last year with promises for record education funding from Albany.

Instead, Cuomo laid the setting for a challenging year at the state Capitol, made worse, he insisted time after time, by tax and spending policies coming from Washington. The governor said the state would sue the federal government over recent tax law changes that limit the deductibility of state and local taxes — a measure that can disproportionately hit high-tax states like New York.

The governor, in his eighth State of the State, also repeated past claims that his administration is considering an overhaul of the state’s tax code to possibly help New Yorkers affected by the state and local tax deductibility change – mostly higher income residents – to get around the new federal changes coming in the 2018 tax year.

One idea: Reduce New York’s focus on personal income tax collections with a new payroll-based system.

“It is complicated. It is difficult. But it is clear we must protect New York taxpayers from this assault,’’ Cuomo said in a speech at a state convention center in Albany.

He did not provide details, which will come when he presents his 2018 state budget plan in two weeks.

“It makes a lot of sense,’’ Assembly Speaker Carl Heastie, a Bronx Democrat, said in embracing a refocusing of the state’s tax code.

Heastie, a Cuomo ally, said it is uncertain if a heavier emphasis on payroll taxes in New York would raise more money for the state than currently comes in via income taxes.

“I do think … that for those people who were going to benefit from this federal tax bill (that) they should be able to help out and contribute more,’’ he said, noting who might win and lose under the Cuomo plan is still being developed.

The Business Council, a corporate lobbying group, immediately said it has “major concerns” with any effort by Cuomo to increase business payroll taxes.

Tough year ahead

The administration is also considering “new opportunities for charitable contributions to support public programs,’’ as another work-around the state may adopt to address the tax deductibility matter, according to written remarks he presented to the Legislature. The governor said the state will sue the federal government to try to block the new federal law, which he called unfair to New Yorkers. He also said New York will lead a “repeal and replace” effort – a not-so-subtle reference to GOP efforts to beat back Obamacare.

The state projects a $4.4 billion deficit for the coming year, and it is expected to grow further if certain federal spending cuts — projected at $2 billion — hit the state.

“We will need that confidence because 2018 may be the toughest year New York has faced in modern history,’’ Cuomo’s written message said. Cuomo appeared to try to shift the causes of many of New York’s problems onto Washington, calling the Trump administration and Congress “the most aggressive and hostile in history” against New York State.

Analysis: For some, Cuomo's State of State sounds like presidential speech

With Assembly Democrats not ruling out tax hikes to help erase the state’s deficit, Republicans were left wondering how Cuomo would pay for some of the items he envisions in a year of a worsening deficit. There was also a steady chorus that Cuomo’s speech was too heavy on national talk by a governor seeking to keep his name alive among potential 2020 Democratic White House contenders.

Some Republicans also slapped at Cuomo’s characterizations that high local property taxes are the result of actions beyond Albany.

“The reality is a major contributor to high local property taxes is unfunded state mandates and regulations,’’ said Sen. Chris Jacobs, a Buffalo Republican.

Among specific plans unveiled Wednesday, Cuomo said he would:

  • Press for cashless tolling across the entire New York Thruway system, to be enacted statewide by sometime in 2020. He also wants a new public/private partnership to rework all Thruway service areas.
  • Lift certain rules that have slowed the state’s advancement of the emerging self-driving vehicle industry.
  • Embrace a series of left-leaning environmental and criminal justice measures, including ending monetary bail for people charged with misdemeanors and non-violent felonies and set new limits on asset seizures.

Less ambitious proposals

Looking to possibly run for a third term, Cuomo sprinkled his address with shout-outs and financial gifts to a number of key regions. He talked of bringing the NHL’s New York Islanders back to Long Island — asking the team’s owners and two players to stand in the audience. He proposed a 400-acre park in Brooklyn, a quicker timetable for a new Penn Station railroad facility in Manhattan. Binghamton got mentioned with a new industrial hemp project, a plan to “reimagine” Rochester’s waterfront and road work in Syracuse.

“Go Bills. Go Bills. Go Bills,’’ Cuomo said of the Buffalo Bills ending their playoff drought.

It turned out to be one of the few Western New York references. Unlike past State of the State messages, Cuomo proposed no major new projects or spending initiatives for the Buffalo area.

The agenda is arguably less ambitious than previous State of the State addresses. Many of Cuomo's proposals are to “extend” or “continue” previously enacted laws or initiatives, such as an effort to encourage local government to share services. Many are low-cost ideas, such as $9 million to expand college course offerings in public high schools, or continuing a previously enacted income tax cut program.

The governor proposes to freeze at $750 million the amount that goes to 10 regional economic development councils. He was silent, though, on embracing any ideas pushed by lawmakers to introduce new sunshine and oversight over how those panels — which are filled by Cuomo and report to Cuomo — make their funding decisions.

Some proposals have no impact on the state’s budget. For instance, Cuomo said he would use an off-budget agency to help install 500,000 new LED bulbs in streetlights across the state. He also promoted new legal actions with state Attorney General Eric T. Schneiderman against pharmacy companies “for breaching their legal duties” by failing to adequately monitor and detect suspicious prescription orders for opioids. He likened pharmaceutical companies that produce opioids that addict people to Big Tobacco.

Other no-cost ideas: requiring personal care product manufacturers to make public via website information about ingredients in their consumer products and requiring the big pension fund for state and local government employees to invest in companies “with adequate female and minority representation.’’

A number of the plans were previously unveiled over the past two weeks, such as new attempts to combat sexual harassment, expanded efforts to help certain industries deal with shortages of skilled workers, expedited work on overhauling the Niagara Falls wastewater treatment plant and confiscation of guns by those convicted in domestic violence cases.

Other proposals come from ideas kicking around for years in Albany, such as his call for term limits for state lawmakers and statewide elected officials, an early voting system and new restrictions on outside incomes of state legislators. Lawmakers expressed little interest in his ideas directed at the Legislature.

The State of the State gave Cuomo an opportunity to verbally wave to key constituents. Labor groups were praised by a governor who represents a state with the largest percentage of union workers. Veterans would get some new programs. Environmentalists got to hear about new offshore wind efforts and greenhouse gas emission reduction plans. Police groups were treated to promises for new law enforcement spending. “Fight hate, embrace diversity,’’ was the title to one of the proposals spread across a 373-page book that accompanied the governor’s speech.

Assemblywoman Helene Weinstein, chairwoman of the Assembly Ways and Means Committee, said its going to take “some ingenious kinds of work-arounds” to change New York’s tax code to lessen the hit on some taxpayers’ ability to deduct state and local taxes. While she praised Cuomo’s decision to sue the federal government, she noted, “That will be decided long after we do a budget.’’

The state’s new fiscal year starts April 1.

After the crowds started thinning following Cuomo’s speech, Weinstein noted an Albany truism: The State of the State is aspirational.

“When we get the (governor’s) budget, that’s really the document we’re going to work off,’’ she said.

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