Welcome

N.Y. Budget Deal Includes Wealth Tax, Mobile Sports Betting (3)

April 6, 2021, 8:21 PM; Updated: April 7, 2021, 12:27 AM

Millionaires in New York would pay higher taxes and gamblers would be able to wager on the go under the $212 billion budget deal reached Tuesday by state leaders.

Gov. Andrew Cuomo (D) announced an agreement worked out with Senate Majority Leader Andrea Stewart-Cousins (D) and Assembly Speaker Carl Heastie (D). The final budget bills were released late Tuesday night.

Under the fiscal 2022 deal, New York would become the most populous state to legalize mobile sports betting, creating a new revenue stream estimated at $500 million annually, according to state Budget Director Robert Mujica. Sports betting currently is allowed in-person at commercial and tribal casinos.

The deal would temporarily increase the income tax rate to 9.65% from 8.82% for those earning more than $1.1 million and would create two new tax brackets.

The budget deal also would allow the next planned phase of middle-class tax cuts to take effect, and it includes nursing home reforms, a $3 billion environmental bond act, money to revive Pennsylvania Station, and a provision to help low-income families afford internet service.

“The budget is really a budget and Covid management and New York recovery program,” Cuomo told reporters as negotiations were winding down. “It’s the most complicated budget that we’ve ever done.”

Mobile Gambling

The deal would allow at least two mobile sports betting platform providers in the state, who must work with a maximum of four online operators, or skins, according to a news release from the governor’s office. The operators would be required to give between 50% and 55% of their mobile revenues back to the state, said state Sen. Joseph Addabbo Jr. (D) who has been pushing the proposal for years. Once fully phased in, the revenue would go toward education, youth sports, and to combat problem gambling, according to the release.

State legislative leaders didn’t release further details on the mobile sports betting program in their Tuesday announcement, and there’s still work to be done on those provisions outside of the budget, Addabbo Jr. said.

The deal would let the state begin requesting proposals for three new downstate casino licenses, which according to Addabbo, could bring in licensing fees of $500 million each or more. “To have a gaming license in New York state is a commodity. There are those that would be willing to pay this money up front,” he said.

New York has a moratorium on new casinos in several Downstate regions through 2023 in an effort to help Upstate casinos develop their businesses.

Federal Infusion

Negotiations were complicated by a projected $10.2 billion deficit for fiscal 2022 on top of $4.77 billion in red ink for fiscal 2021. The state is projecting a multibillion-dollar deficit through at least 2024 as a result of the coronavirus pandemic. New York’s economy has been ravaged by business shutdowns and crowd limits on shopping and entertainment.

The state’s getting $12.6 billion in federal Covid-19 relief, Mujica has said. The state also had an increase in tax revenue in February, driven by a sharp rise in personal income tax receipts.

As a result, the deal doesn’t include across-the-board cuts, as originally proposed, and it would lift a freeze on state worker wage increases. But it still left a revenue shortfall of $2.5 billion for the coming year, Mujica said.

The budget deal would close the deficit and invests in the ongoing response to the pandemic and recovery efforts, according to the Tuesday announcement.

Taxing Millionaires

The final deal will temporarily increase taxes for millionaires. Income-tax rates for single filers reporting over $1.1 million, and joint filers reporting over $2.2 million or more, would increase to 9.65% from 8.82%, according to the state Division of Budget. For head of household filers, the bottom bracket starts at $1.6 million and goes up to $5 million, according to the office.

The deal also would create two new tax brackets, according to the governor’s office. Those making $5 million or more would be taxed at 10.3%, and those earning over $25 million would be taxed at 10.9%. The new rates would expire in 2027.

Income taxes for New York City residents earning more than $1 million would be between 13.5% and 14.8% — the highest combined local tax rate in the nation. California currently has the highest with a 13.3% tax on income over $1 million, according to the Tax Foundation.

About 2% of New Yorkers pay 50% of the state’s personal income taxes, Mujica has said.

The budget would increase the corporate franchise tax rate to 7.25% from 6.5% for three years through 2023, according to the news release. The rate would remain at 6.5% for companies making less than $5 million.

The deal also would allow the next planned phase of middle-class tax cuts to take effect. The personal income tax rate will drop in the 2021 tax year to 5.97% from 6.09% for single filers earning between $21,400 and $80,650, and to 6.33% from 6.41% for those in the next bracket, which goes to $215,400.

The same decrease would apply to joint filers with those earning between $43,000 to $161,550 dropping to a rate of 5.97%, and for those in the next bracket, up to $323,200, at 6.33%, according to the Division of Budget.

Cuomo had proposed freezing the tax cuts, which were enacted in 2016, if the state didn’t receive enough federal aid.

“This is a post-crisis budget. We have federal funds, we have state funds, we have reconstruction we have to do, we have relief that we have to do, and we have to rebuild an economy in a post-Covid world,” Cuomo said on Monday.

Environmental Bond, Prevailing Wage

The final budget agreement includes:

  • Earmarking $2.1 billion to provide assistance for workers who were not eligible for unemployment insurance during the pandemic, including undocumented immigrants.
  • The state would place a $3 billion bond issue on the ballot in November, according to measure (A.3004D/S.2504D). If approved by voters, it would allocate funding for a number of projects, including habitat restoration, flood reduction, environmental justice communities, preservation efforts, renewable energy expansion, and water quality improvements. Cuomo had taken the measure off the ballot last year, citing a dire financial situation stemming from the coronavirus pandemic.
  • Prevailing wage laws would apply to construction work to install renewable energy systems involving energy credits by a public entity, according to measure (A.3006C/S.2506C). The bill would require a “labor peace agreement,” prohibiting unions from picketing and boycotts. Iron and structural steel used for those projects would have to be made in the U.S. unless it’s not in the public interest, for example if it would increase the contract cost by an unreasonable amount.

Health Care Measures

  • The budget would require state agencies spending at least $50,000 on personal protective equipment to buy U.S.-made masks and ventilators.
  • Residential health care facilities, starting next year, would be required to spend a minimum of 70% of their revenue on direct care, including 40% on resident-facing staffing, according to the budget bill. If a facility fails to meet the minimum, or its revenue exceeds its expenses by more than 5% annually, it must give the excess revenue back to the state. The aid would go into a nursing home quality pool fund.
  • The budget would eliminate premiums for the state’s Essential Plan coverage for more than 400,000 New Yorkers earning between $39,300 and $52,400 for a family of four, according to the news release. It also would expand coverage to include dental and vision.

Broadband, Penn Station

  • Internet service providers would have to offer $15-per-month high-speed broadband access to low-income families. Companies would have 60 days after the bill is passed to offer the service, and face fines of up to $1,000 per violation. The cost could change based on inflation in the future, according to the bill (A.3006C/S.2506C).
  • The budget plan includes $1.3 billion in one-time capital spending, that can be bonded for the Empire Station Complex, according to measure (A.3004D/S.2504D). It’s for the ambitious plan to redevelop Pennsylvania Station and the surrounding area, a project that could reshape midtown Manhattan that has drawn widespread criticism by city and state lawmakers.

Pandemic Relief, Election Funds

  • The deal includes a $1 billion relief grant package to help small businesses, restaurants and arts and cultural organizations recover from the pandemic. It also includes $35 million in tax credits to help restaurant workers, according to the news release.
  • The budget includes $25 million to modernize and secure state and local voting infrastructure, as well as $3 million to implement early voting and oversee changes to voting.

The Assembly and state Senate have been voting on budget bills as they became available, and were on track to continue the piecemeal process on Wednesday.

The budget agreement is several days late, as the fiscal year began at midnight on April 1, and was hammered out as Cuomo faces multiple scandals and investigations, including a federal probe of his administration’s handling of coronavirus deaths in nursing homes.

The state Attorney General is investigating several sexual harassment claims against the governor, and the Assembly Judiciary Committee last month launched an impeachment inquiry.

(Updates details on the deal and clarifies middle class tax numbers)

To contact the reporter on this story: Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com

To contact the editors responsible for this story: Katherine Rizzo at krizzo@bgov.com; Heather Rothman at hrothman@bgov.com; Tina May at tmay@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

To read more articles log in. To learn more about a subscription click here.