New York Business Leaders Urge State Lawmakers to Not Raise Taxes

By Jimmy Vielkind

ALBANY, N.Y. -- Executives at major Wall Street firms and other New York employers warned that increasing taxes as part of the state budget could lead high-income earners who left the state during the Covid-19 pandemic to never return.

In a letter delivered Monday to Gov. Andrew Cuomo and Democratic leaders of the state Legislature, 250 business executives said a package of tax increases proposed by the Assembly and Senate would "jeopardize New York's recovery from the economic crisis inflicted by COVID-19" and were unnecessary because of the $1.9 trillion federal relief bill passed earlier this month. Democratic leaders of the state Assembly and Senate have proposed increasing income taxes and levying a new surcharge on capital gains. The budget is due later this month.

The letter was signed by JPMorgan Chase & Co. Chief Executive Jamie Dimon, Citigroup Inc. Chief Executive Jane Fraser, Morgan Stanley Chief Executive James Gorman, BlackRock Inc. Chairman Larry Fink and other executives at major law firms and real-estate companies as well as chambers of commerce around the state. Robert Thomson, the CEO of News Corp, also signed the letter. News Corp is the parent company of The Wall Street Journal publisher Dow Jones & Co.

The highest-earning 5% of tax filers in the state account for more than 60% of the roughly $50 billion that New York raises each year in state income taxes. The executives said remote-working patterns during the pandemic meant many of the financial, real estate and legal professionals in this group may permanently leave the tax base if proposed taxes are approved.

"Many members of our workforce have resettled their families in other locations, generally with far lower taxes than New York, and the proposed tax increases will make it harder to get them to return," the executives wrote. "This is not about companies threatening to leave the state; this is simply about our people voting with their feet."

Kathryn Wylde, president of the business group Partnership for New York City and one of the letter's signatories, said the Democratic governor has been a force of fiscal moderation during his time in office.

"It's obvious that there's great concern among business leadership that the governor is in a weakened state because of the supermajorities that Democrats have in both houses of the Legislature," Ms. Wylde said in an interview.

The governor is also grappling with an impeachment investigation into accusations that he sexually harassed multiple women and how his administration handled Covid-19 in nursing homes.

Mr. Cuomo has denied ever touching anybody inappropriately and has apologized if his behavior made anyone feel uncomfortable. He has said he is cooperating with the impeachment investigation as well as a probe overseen by Attorney General Letitia James into the harassment allegations.

Freeman Klopott, a spokesman for the state budget office, said the Cuomo administration was focused on the economy and "putting out the welcome mat for the New Yorkers who left during the pandemic."

On Monday, Mr. Cuomo and state Budget Director Robert Mujica said during a conference call with reporters that budget negotiations were proceeding between executive and legislative aides.

Mr. Mujica said additional federal aid -- New York state is slated to receive $12.5 billion in unrestricted payments under the bill, and billions more dedicated for health and education programs -- and better-than-expected revenue payments would allow the state to avoid $3.7 billion in planned spending reductions.

But he stopped short of saying what effect the improving fiscal picture would have on taxation. Mr. Cuomo proposed a $193 billion budget in January that raised $1.5 billion through a temporary income-tax surcharge starting on people reporting more than $5 million of income.

"As of right now we have the resources necessary so that there would be no cuts in the governor's budget, so you wouldn't require any significant level of tax increases to pay for the restorations," Mr. Mujica said Monday.

Freeman Klopott, a spokesman for the state budget office, didn't respond to requests for comment on the letter or on Ms. Wylde's sentiments.

Democrats who dominate the Assembly and Senate passed budget proposals last week that each raised more than $6.5 billion by increasing corporate franchise and income-tax rates and enacting a new surcharge on income derived from capital gains.

Michael Whyland, a spokesman for Assembly Speaker Carl Heastie, said Democrats in that chamber opposed Mr. Cuomo's cuts. "Our families and neighbors demand sustainable solutions to problems that existed long before Covid struck, and that will require additional revenue which our Assembly budget proposal supports," Mr. Whyland said.

Mike Murphy, a spokesman for Senate Majority Leader Andrea Stewart-Cousins, a Democrat from Yonkers, said Senate Democrats' position remained unchanged. They are pushing for a budget that "doesn't rely on one-shots and austerity but creates long-term equity," Mr. Murphy said.

The state's largest labor groups issued statements last week supporting the legislators' budget plans, which would use additional revenue from higher taxes for grants to small businesses, tenants and undocumented immigrants as well as increased funding for schools.

The Democratic Socialists of America and labor-backed Invest in Our New York Coalition organized a march in New York City this weekend that simultaneously called for Mr. Cuomo to be impeached and for lawmakers to pass higher taxes that he has resisted.

Rebecca Bailin, campaign manager for the Invest in Our New York Coalition, said Mr. Cuomo wasn't coming to the negotiating table at full strength. She urged Ms. Stewart-Cousins and Mr. Heastie, a Democrat from the Bronx, to hold firm.

Ms. Bailin's coalition says higher income taxes won't prompt migration. The number of millionaires in New York went up after state lawmakers increased income taxes in 2009, she said.

In the letter, executives said Covid-19 "demonstrated that our workforce is more mobile than we ever imagined." According to firms surveyed by Ms. Wylde's group, 90% of office employees are now working remotely.

"We need them to return to the city and help us rebuild this economy," she said. "The tax proposals in the legislative budgets are all directed at punishing the rich and redistributing their wealth."

Write to Jimmy Vielkind at [e-mail]

(END) Dow Jones Newswires

03-23-21 0638ET