Friday, July 31, 2020

He who pays the piper...

New York governor Andrew Cuomo has stood firm against intensifying pressure to avert massive budget cuts by raising taxes on the many billionaires who live in his state.

Cuomo has insisted that he fears that the tax initiative will prompt the super-rich to leave the state. On Wednesday, he doubled down, warning that if the state tried to balance its budget through billionaire tax hikes “you’d have no billionaires left”. New York City alone is home to more billionaires than any other metropolitan area on the planet. It is an argument he has been making for years to justify opposition to tax increases on his state’s financial elite and there is little basis for it. Stanford University researchers’ 2016 study of IRS data found that so-called tax flight among the wealthy is negligible.

Cuomo is protecting a group of his most important financial donors. More than a third of New York’s billionaires have funneled cash to Cumo’s political machine.

 43 of New York’s 118 billionaire families have donated money to Cuomo’s campaigns and the state Democratic party committee he controls. In all, those billionaires and their family members have delivered more than $8m to Cuomo’s political apparatus since his first gubernatorial campaign. That includes large donations from billionaires in the last few weeks as Cuomo has fought to stop tax hikes on billionaires.

Eleven of Cuomo’s billionaire donors have delivered $100,000 or more to his campaign and the New York State Democratic party’s housekeeping fund. They include hedge fund titans James Simons ($3.6m), Stanley Druckenmiller ($1m) and Daniel Loeb ($114,000); real estate moguls Alexander Rovt ($321,000) and Stephen Ross ($80,000) and investor Ronald Perelman ($197,000). Ross, Simons and Simons’ wife delivered a total of $115,000 to Cuomo this month.

With Cuomo blocking billionaire tax hikes, his 43 billionaire donors have increased their net worth by $22bn during the pandemic. In all, New York’s 118 billionaires have seen their net worth increase by $77bn since coronavirus hit the United States. 

Those billionaire gains in just three months are more than five times the size of the state’s entire projected budget shortfall of $14bn.

Cuomo has previously championed a plan to eliminate New York’s bank tax and he reduced the state’s corporate tax rates to its lowest level in more than 50 years. He also cut tax rates on purchasers of luxury yachts and private jets – and now he has worked to stymie his party’s billionaire tax plan.

Cuomo has pushed for big spending cuts. In April, the legislature approved a plan to let Cumo’s budget director make $10bn of spending cuts. That plan also approved Cuomo’s push to cut $2.5bn from Medicaid, flatline education spending and impose tougher eligibility requirements on some long-term public benefits. New Yorkers may see increased mass transit fares and road tolls because “the money needs to come from somewhere.” Local governments could also see big cuts.

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