New York is in better financial shape than it was four years ago when, at then-Gov. David Paterson’s request, the Legislature imposed a new utility “surcharge” of 1.67 percent that has since raised roughly $500 million a year for the state. But it’s hardly in good enough shape to forgo the revenue, this year or in the immediate future, which is why Gov. Andrew Cuomo has proposed extending the tax — call it what it is — beyond its scheduled sunset 14 months from now. But no matter the state’s fiscal bind, the tax is not good for New York businesses or low or middle-income residents.
We’ll start with individuals: The surcharge is a sales tax, costing the average utility customer $55 per year. Some people can handle the hit of a few extra dollars per month without feeling it; for others, it’s a different story.
A regressive (sales) tax takes a larger share of a poor person’s income than a progressive tax (like the income tax). If the state needs the money, and it clearly does, shouldn‘t the people most able to afford it be the ones to pay? Admittedly, millionaires got hit with a tax hike last year, but there are a lot of well-off New Yorkers under that threshold who got small tax cuts. It might be politically difficult for Cuomo to ask for this money back, but better he get it from people earning $200,000 to $400,000 per year than those earning less than $50,000.
As for businesses, renewing the tax would hurt large utility customers (e.g. manufacturers) the most. They’re the ones Cuomo has been bending over backward to keep from moving out of New York, in part because of its high-tax reputation. The typical $30,000-a-year hit on these businesses may not be huge, but along with others of its type, has a way of adding up.
And the state promised that the tax would be temporary, so its credibility is on the line. If it reneges on its promise, whatever good faith Cuomo may have built up over the past few years will be squandered.