New York State is facing a $2.3 billion budget deficit, and Gov. Andrew Cuomo believes it's largely due to the Trump administration's tax reforms which, on the "flip side," have taxed the rich and may be encouraging wealthy residents to leave.
President Trump's Tax Cuts and Jobs Act, which takes effect for the 2018 tax year, places a cap on the state and local tax deduction (known as SALT) that Americans can take. Residents of largely blue states with relatively high state and local taxes are adversely affected, Cuomo says, by the new cap of a $10,000 deduction. New York state's average SALT deduction was around $22,000 before the law changed.
"We've set up reserves, but this is worse than we had anticipated," Cuomo said at a state Capitol news conference in Albany on Monday after referring to the fiscal situation as being "as serious as a heart attack."
The extreme dip in collections has made Cuomo's $175 billion state budget proposal, which he offered just last week, "unsupportable," he said. He added that he plans to make adjustments in the coming weeks.
The governor was joined on Monday by Democratic Comptroller Thomas DiNapoli and Robert Mujica, the governor's budget director. DiNapoli referred to the unprecedented deficit as "the most serious revenue shock that the state has faced in many years," adding that he believes it will "get worse before it gets better."
“This is the flip side. Tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?”
Trump's 2017 act was not the sole cause of New York's budget fiasco, Cuomo said. He added that the stock market drop in December may have had an impact, and also struck a blow to the bonuses given to Wall Street traders, which adds a considerable amount to the state's annual tax collections. Cuomo warned against imposing increased taxes on the wealthy in New York as a solution, which is already home to the nation's second-highest taxes on millionaires, according to North Country Public Radio.
“This is the flip side," Cuomo said. "Tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?”
The Associated Press contributed to the reporting of this story.