1
1 BEFORE THE NEW YORK STATE SENATE FINANCE
AND ASSEMBLY WAYS AND MEANS COMMITTEES
2 ------------------------------------------------------
3 JOINT LEGISLATIVE HEARING
4 In the Matter of the
2024-2025 EXECUTIVE BUDGET
5 ON TAXES
6 ------------------------------------------------------
7 Hearing Room B
Legislative Office Building
8 Albany, New York
9 February 14, 2024
9:34 a.m.
10
11 PRESIDING:
12 Assemblywoman Helene E. Weinstein
Chair, Assembly Ways & Means Committee
13
Senator Andrew Gounardes
14 Chair, Senate Committee on Budget and Revenue
15 PRESENT:
16 Senator Thomas F. O'Mara
Senate Finance Committee (RM)
17
Assemblyman Edward P. Ra
18 Assembly Ways & Means Committee (RM)
19 Assemblywoman Jaime R. Williams
Chair, Committee on Real Property Taxation
20
Assemblyman Brian D. Miller
21
Senator Dean Murray
22
Assemblywoman Jo Anne Simon
23
Senator John C. Liu
24
2
1 2024-2025 Executive Budget
Taxes
2 2-14-24
3 PRESENT: (Continued)
4 Assemblyman Erik M. Dilan
5 Senator Bill Weber
6 Assemblywoman MaryJane Shimsky
7 Assemblyman Zohran K. Mamdani
8 Senator George M. Borrello
9 Assemblyman Edward C. Braunstein
10 Senator Brad Hoylman-Sigal
11
12
13
14
15
16
17
18
19
20
21
22
23
24
3
1 2024-2025 Executive Budget
Taxes
2 2-14-24
3
4 LIST OF SPEAKERS
5 STATEMENT QUESTIONS
6 Amanda Hiller
Acting Commissioner
7 NYS Department of Taxation
and Finance 7 14
8
Warren Wheeler
9 Executive Director
New York State Assessors
10 Association
-and-
11 Nathan Gusdorf
Executive Director
12 Fiscal Policy Institute
-and-
13 James Inniss
Public Safety Advocate
14 New York Communities for Change
-and-
15 Carolyn Martinez-Class
Campaign Manager
16 Invest in Our New York
-and-
17 Rebecca Garrard
Deputy Director of Campaigns
18 and Movement Politics
Citizen Action of New York
19 -and-
Michael Kink
20 Executive Director
Strong Economy for All
21 Coalition 94 113
22
23
24
4
1 CHAIRWOMAN WEINSTEIN: Good morning.
2 This is the budget hearing on Taxes,
3 and the last day of budget hearings for this
4 year. I'm Helene Weinstein, chair of the
5 Assembly Ways and Means Committee and cochair
6 of today's hearings.
7 Today we begin the 12th in a series of
8 hearings conducted by the fiscal committees
9 of the Legislature regarding the Governor's
10 proposed budget for fiscal year 2024-'25.
11 The hearings are conducted pursuant to the
12 New York State Constitution and the
13 Legislative Law.
14 Today the Assembly Ways and Means
15 Committee and the Senate Finance Committee
16 will hear testimony concerning the Governor's
17 proposal for taxation. After this hearing
18 there will be a second hearing on Housing, if
19 people are tuning in and wondering.
20 I'd like to now introduce the members
21 from the Assembly that are here with us
22 today, and then Senator Gounardes, who is the
23 chair of the Revenue Committee, will
24 introduce the members of the Senate.
5
1 So we have with us today Assemblywoman
2 Williams, who is chair of our Real Property
3 Tax Committee. We have Assemblyman
4 Braunstein, Assemblyman Mamdani,
5 Assemblywoman Shimsky and Assemblyman Dilan.
6 And Senator Gounardes, would you like
7 to introduce your colleagues?
8 SENATOR GOUNARDES: Good morning.
9 I'll do my best Liz Krueger impression today,
10 as chair of the Committee on Budget and
11 Revenue.
12 We are joined so far by the ranker on
13 the Finance Committee, Senator O'Mara;
14 Senator Liu; Senator Weber, the ranker on the
15 Budget and Revenue Committee; as well as
16 Senator Borrello.
17 CHAIRWOMAN WEINSTEIN: Assemblyman Ed
18 Ra is the ranker on Ways and Means.
19 ASSEMBLYMAN RA: Thank you.
20 Right now we are joined by
21 Assemblyman Brian Miller, our ranker on
22 Real Property Taxation.
23 CHAIRWOMAN WEINSTEIN: Thank you.
24 So let me just give some ground rules
6
1 both for witnesses and for the members.
2 The governmental witness, our Tax
3 commissioner, Amanda Hiller, will have
4 10 minutes. The nongovernmental witnesses
5 that will come later will have three minutes
6 each. They will be in a panel. And after
7 all of them speak, then there will be time
8 for the questions.
9 In terms of questions, the chairs of
10 the relevant committee will have 10 minutes
11 to ask questions of the governmental witness,
12 and all other members will have three
13 minutes.
14 And when we get to the nongovernmental
15 witness panel, all members will have three
16 minutes.
17 The chairs of the relevant committees
18 are the only ones who have a second round
19 with the governmental witness of three
20 minutes.
21 And then just sort of a warning to
22 everybody. Your testimony has been received,
23 is posted. Please don't read word for word.
24 Somehow the time clock goes much faster than
7
1 you think.
2 And speaking of the time clock,
3 there's a green button that means it's time
4 to go, to speak. The yellow button means
5 there's a minute left. And the red button
6 means you're finished.
7 And just so members know to tell both
8 myself and Senator Gounardes that they wish
9 to speak.
10 So with that -- with that, I'd like to
11 introduce the -- are you still acting
12 commissioner? Okay -- acting commissioner
13 and general counsel of the Department of
14 Taxation and Finance, Amanda Hiller.
15 Oh, that's also -- there's -- you
16 press it kind of -- they're new mics, and the
17 ring will turn green. There you go.
18 DTF ACTING COMMISSIONER HILLER: There
19 we go. Is that okay?
20 CHAIRWOMAN WEINSTEIN: Sounds good.
21 DTF ACTING COMMISSIONER HILLER: Okay,
22 great.
23 Good morning, Senator Gounardes,
24 Assemblymember Weinstein, members of the
8
1 fiscal committees. I'm Amanda Hiller, acting
2 commissioner and general counsel of the
3 Department of Taxation and Finance. Thank
4 you for this opportunity to discuss Governor
5 Hochul's 2025 Executive Budget and the
6 operations of the Tax Department.
7 When I appeared before you last year,
8 I warned of risks on the horizon. The main
9 concern at the time was that the tightened
10 monetary policy we needed to combat inflation
11 could cause a recession. Today it appears we
12 may have avoided the recession we feared.
13 Still, New York's economic recovery continues
14 to lag behind the national recovery.
15 As we feared, the weakening of tax
16 receipts we saw in fiscal year 2023 did
17 continue in 2024, and the Division of the
18 Budget projects that tax receipts, although
19 improving, will remain well below 2023 levels
20 in fiscal years '25 and '26, largely due to
21 weaker personal and business income tax
22 receipts. Job growth and wage growth are
23 slowing, and affordability remains a pressing
24 concern for too many New Yorkers.
9
1 Governor Hochul recognizes these
2 challenges and has proposed a responsible
3 state budget to support our ongoing economic
4 recovery. The Governor's budget proposal
5 makes targeted investments in mental health,
6 public safety, housing and education that
7 will benefit all New Yorkers, without raising
8 taxes. In addition, her budget proposal
9 devotes an unprecedented level of resources
10 to address the needs of recent migrants.
11 The Executive Budget includes several
12 revenue-related proposals, but there are two
13 that stand out. First, the Governor has
14 proposed to improve sales tax compliance in
15 the short-term vacation rental industry. I
16 suspect that most individual hosts don't
17 realize they are responsible for collecting
18 the sales taxes due on their rentals. The
19 Executive Budget proposes to shift those
20 sales tax responsibilities from individual
21 hosts to the internet platforms that
22 facilitate rentals and collect the rental
23 charges, just as we did when we shifted sales
24 tax responsibilities from small individual
10
1 sellers to Amazon and similar internet
2 marketplaces.
3 Hotels already collect and pay over
4 sales taxes on the rooms they rent. By
5 making this change, we will ensure that
6 short-term vacation rentals follow those same
7 rules.
8 The Executive Budget also proposes to
9 make an important change to New York's
10 adult-use cannabis taxes. The Marijuana
11 Taxation and Regulation Act imposed a
12 distributor-level tax on adult-use cannabis
13 that is measured by the THC content of
14 cannabis products.
15 Cannabis growers and others have
16 complained that this "potency tax" is
17 unwieldy, largely because it requires testing
18 that is both expensive and unreliable, and
19 they have called for the elimination of this
20 tax.
21 Governor Hochul recognizes the
22 challenges posed by the potency tax, but she
23 also understands the importance of having a
24 distributor-level tax in order to combat the
11
1 sale of illicit cannabis. The Executive
2 Budget proposal would repeal the current
3 complex potency tax and replace it with a
4 simple price-based tax.
5 I believe the enactment of these
6 proposals will streamline and simplify tax
7 compliance, thereby improving the fairness
8 and effectiveness of New York's tax laws.
9 At the Tax Department, we strive every
10 day to ensure the fairness and effectiveness
11 of our administration of the tax laws you've
12 already enacted. Last year, the
13 3,800 members of Team Tax processed more than
14 27 million tax filings and closed
15 750,000 audit cases as we worked to collect
16 $147 billion in tax revenues that support the
17 delivery of state and local government
18 programs and services.
19 We issued $14.4 billion in income tax
20 refunds to 7.4 million taxpayers --
21 92 percent in 30 days or less -- and we
22 delivered close to 1 million STAR property
23 tax relief checks to homeowners across the
24 state.
12
1 We are able to operate at this scale
2 only by leveraging sophisticated information
3 technology platforms. We're now in Year 3 of
4 a five-year Tax Modernization Project to
5 improve the flexibility and interoperability
6 of our systems, which will allow us to be
7 more nimble as we evolve our operations to
8 respond to changing laws and expectations and
9 work to ensure fair and equitable outcomes
10 for all of our current and future customers.
11 I'm pleased to report that we are on budget
12 and ahead of schedule.
13 We are also pursuing parallel projects
14 that leverage technology to improve the
15 taxpayer experience. This year, following a
16 successful pilot project on Long Island, we
17 will be offering homeowners across the state
18 the option of receiving their STAR credits by
19 direct deposit, which is faster, easier,
20 safer, greener and cheaper than sending paper
21 checks through the mail.
22 We also recently implemented a
23 call-back feature at our call center so
24 taxpayers no longer have to wait on hold to
13
1 get their tax questions answered.
2 Finally, as you may have heard, the
3 IRS is piloting the Direct File Program that
4 will allow taxpayers to prepare and file
5 their federal tax returns for free. New York
6 is one of four states partnering with the IRS
7 to pilot parallel Direct File tools for state
8 tax returns.
9 I'm excited about this pilot project,
10 which accepted its first New York return
11 yesterday. I think it's the future of tax
12 filing. At the same time, we need to be
13 cautious as we test this program in New York.
14 This early pilot phase of the program will
15 not be right for all New Yorkers because it
16 will only be accepting limited types of
17 income, deductions and credits.
18 We're currently testing the new tools
19 with a very small pool of taxpayers. If this
20 testing goes well, we expect Direct File will
21 be a great option for about 10 percent of
22 New York income tax payers later this spring.
23 Although this pilot will not be the right tax
24 preparation option for most New Yorkers this
14
1 year, we will learn from this pilot so we can
2 expand it to serve all New Yorkers in the
3 future.
4 To conclude, I remain incredibly proud
5 of the work we are doing at the Tax
6 Department. I'm excited about the
7 initiatives we are pursuing and look forward
8 to working with you to move them forward.
9 I'm happy to take any questions.
10 CHAIRWOMAN WEINSTEIN: Thank you.
11 So we go to our chair of Real Property
12 Tax, Assemblywoman Williams.
13 ASSEMBLYWOMAN WILLIAMS: Thank you
14 very much. (Mic issues.) I have a few
15 questions. Do I just -- all at once? Okay.
16 So first, the return of foreclosure
17 excess to property homeowners. As you may
18 know, the Executive proposes to amend the
19 Real Property Tax Law to ensure that surplus
20 funds resulting from tax foreclosure sales
21 are returned to the former owner, thereby
22 addressing the recent Supreme Court ruling
23 Tyler v. Hennepin County, from Minnesota.
24 Two questions here. Has the
15
1 department received any feedback from local
2 government about this proposal? And would
3 the individual be required to endure any
4 further litigation in order to claim their
5 surplus?
6 DTF ACTING COMMISSIONER HILLER: So
7 there was an Executive Budget proposal last
8 year in anticipation of the Supreme Court's
9 decision in Tyler v. Hennepin County.
10 And for those who aren't familiar,
11 New York is one of a very small number of
12 states that historically have allowed local
13 governments to retain the surplus when they
14 sell property for outstanding property tax
15 debts.
16 And the case that was before the
17 Supreme Court in Minnesota, I think a lot of
18 observers expected the decision that the
19 Supreme Court ultimately rendered, which is
20 that retaining that surplus is an
21 unconstitutional taking.
22 And so there was an Executive Budget
23 proposal last year to try to address --
24 develop a foreclosure process to return those
16
1 surplus funds. Our staff has engaged with
2 local governments last year with regard to
3 that proposal, which ultimately was not
4 adopted. I think there was -- I think a lot
5 of folks still held hope that the
6 Supreme Court wouldn't ultimately render the
7 decision they rendered.
8 And since then, the proposal has been
9 refined. There's been a lot of engagement,
10 primary with local government attorneys about
11 the proposal. It's still a challenge for
12 local governments. I think there are many
13 local governments who have used the surplus
14 funds they have retained to help fund local
15 programs and services. And so having those
16 funds no longer available will be a financial
17 challenge for some local governments.
18 But it remains the law of the land now
19 that we have to return it, so there needs to
20 be a process to ensure that that happens
21 smoothly.
22 The proposal that the Executive has
23 put forward would provide for the payment of
24 outstanding liens on a property from the
17
1 surplus before the remaining surplus gets
2 paid over to the property owner, much the way
3 those outstanding liens are paid in a
4 mortgage foreclosure process now.
5 And I think that that's a careful
6 balance, because we don't want to be in a
7 position where we're returning a surplus to a
8 property owner with those liens outstanding.
9 ASSEMBLYWOMAN WILLIAMS: Okay.
10 Next, to clarify the taxable status of
11 telecommunications property, the Executive
12 proposes to clarify that property used
13 primarily or exclusively for the transmission
14 of radio, television or cable television
15 shall not be considered taxable real
16 property.
17 Why is property that primarily
18 transmits mobile internet signals considered
19 taxable property, but other property is not?
20 And do you foresee this proposal having any
21 significant local fiscal impact?
22 DTF ACTING COMMISSIONER HILLER: So I
23 think beginning in 1987, cable equipment,
24 cable -- the cables for cable television and
18
1 other cable transmission equipment -- was
2 exempted from real property tax. And it's
3 defined in the law as not being real property
4 for purposes of the real property tax.
5 These days I think we all know that
6 the distinction between cable service and
7 other broadband internet services is
8 blurring. And the -- there are a number of
9 broadband internet providers who have sought
10 to avail themselves of the exemption that's
11 on books for cable television by saying,
12 Well, we also transmit news and radio --
13 entertainment information.
14 There have been a number of court
15 decisions that have shut down that argument,
16 but the litigation persists. And that
17 litigation creates delays in the finalization
18 of property taxes for local communities. So
19 we've advanced this proposal to provide
20 certainty in the hopes of ending that
21 litigation.
22 It may be that this proposal is less
23 important today because there was an
24 appellate decision from the Third Department
19
1 recently that is pretty definitive on this
2 question, and it may serve to shut down this
3 litigation going forward.
4 And then on the different question of
5 why -- you know, I wasn't around to do this
6 in 1987, but my understanding is that cable
7 was a fledgling industry at the time and
8 there was a desire to ensure that it was
9 expanded.
10 And, you know, I think there are
11 different questions to be asked here. If
12 there's a policy desire to treat broadband
13 equipment the same way we're treating cable
14 equipment, we could either exempt both or tax
15 both. I tend to be -- you know, I have
16 concerns about the fairness of our tax base
17 already. And so I'm always a little suspect
18 when we're exempting for-profit industries
19 from property taxes. And so if it were me, I
20 would probably tax them both.
21 But I can understand at the same time
22 that we have a desperate need to expand
23 broadband access, especially in our upstate
24 communities. And it might be that the right
20
1 answer is to treat broadband the way we've
2 historically treated cable in order to help
3 subsidize that industry and expand it in
4 communities where there's a very real need.
5 ASSEMBLYWOMAN WILLIAMS: Okay.
6 Last question. This has to do with
7 creating a new tax abatement for rental
8 housing construction.
9 The Executive proposes to establish a
10 new property tax incentive program in
11 New York City to incentivize the construction
12 of new rental housing, contingent upon a
13 memorandum of understanding between the
14 largest real estate trade developer
15 association and the largest building and
16 construction worker trade association.
17 The question here: Why doesn't this
18 proposal directly outline wage standards
19 instead of leaving these standards to be
20 determined by an MOU?
21 DTF ACTING COMMISSIONER HILLER: I
22 wish I had an answer to that question, but I
23 think it is more properly posed at the
24 Housing hearing later this afternoon.
21
1 Although this exemption would sit in the
2 Real Property Tax Law, I think it has
3 historically been the subject of housing
4 policy negotiations and housing policy
5 debate. And the Tax Department was not part
6 of the development of this proposal.
7 ASSEMBLYWOMAN WILLIAMS: And does the
8 department have any idea of the fiscal impact
9 at a local level for this?
10 DTF ACTING COMMISSIONER HILLER:
11 Again, no, we weren't -- we -- this is, you
12 know, I think traditionally considered to be
13 housing policy, just as 421-a is
14 considered -- was considered to be housing
15 policy. And the Tax Department is not
16 especially involved there.
17 ASSEMBLYWOMAN WILLIAMS: Okay. That's
18 it.
19 DTF ACTING COMMISSIONER HILLER: But
20 you do still have a chance at the Housing
21 hearing later.
22 CHAIRWOMAN WEINSTEIN: Thank you.
23 Senator Gounardes.
24 SENATOR GOUNARDES: There we go.
22
1 Thank you.
2 We've also been joined now by
3 Senators Murray and Hoylman.
4 And we will start with Senator Liu,
5 for three minutes.
6 SENATOR LIU: Thank you, Mr. Chairman,
7 for letting me go first on the Senate side.
8 It's the first time.
9 (Laughter.)
10 SENATOR LIU: I'll get a lottery
11 ticket later.
12 Thank you, Commissioner, for joining
13 us today. And I have heard from constituents
14 that the department is improving its
15 operations, so I concur with some of the
16 improvements that you've highlighted in your
17 opening testimony.
18 I have just a couple of relatively
19 technical questions. One has to do with the
20 Executive's proposal to extend the sales tax
21 exemption related to the Dodd-Frank
22 Protection Act for another three years. Are
23 you familiar with what I'm referring to?
24 DTF ACTING COMMISSIONER HILLER: I am.
23
1 SENATOR LIU: And the Executive's
2 saying that there's no fiscal impact for
3 extending this for another three years.
4 Doesn't there have to be a fiscal impact?
5 DTF ACTING COMMISSIONER HILLER: I
6 think there has to be a fiscal impact, but I
7 don't think we can quantify it. And I don't
8 think that it represents a change to the
9 financial plan.
10 And I think that that may be why
11 there's no fiscal, you know, listed on the
12 plan. So one of the --
13 SENATOR LIU: Does the financial plan
14 from previous years already assume or presume
15 that there would be an extension?
16 DTF ACTING COMMISSIONER HILLER:
17 Right. Well, I think that -- so one of the
18 things that the Dodd-Frank Act did is it
19 required large financial services industries
20 to spin out many of their back office
21 functions into separate units in order to
22 ensure that if we --
23 SENATOR LIU: Aren't we losing revenue
24 by extending it another three years?
24
1 DTF ACTING COMMISSIONER HILLER: Well,
2 right, but we didn't have -- we weren't
3 taxing these particular transactions before
4 Dodd-Frank.
5 SENATOR LIU: I understand that.
6 DTF ACTING COMMISSIONER HILLER: They
7 were in-house transactions within the
8 organizations, so they weren't being -- you
9 know, we forced these taxpayers to spin out
10 functions that now create taxable
11 transactions within their business.
12 SENATOR LIU: Exactly.
13 DTF ACTING COMMISSIONER HILLER: And
14 so there could -- there could -- I mean, I'm
15 sure that there must be a fiscal because
16 we're not taxing transactions that are
17 taxable transactions. But we can't quantify
18 those because we weren't taxing them before
19 the change, because they weren't taxable
20 transactions before the change.
21 SENATOR LIU: Right, I understand.
22 But, I mean, are we the only state that's
23 exempting these kinds of transactions from
24 sales tax? You know --
25
1 DTF ACTING COMMISSIONER HILLER: I
2 have no idea, but I think we are --
3 (Overtalk.)
4 DTF ACTING COMMISSIONER HILLER: I
5 think we are a state that has -- that is the
6 situs of many of these financial
7 institutions.
8 SENATOR LIU: Even if you're saying
9 that, you know, you can't quantify the amount
10 of lost revenue, you do agree that we're
11 losing revenue by extending it yet another
12 three years.
13 DTF ACTING COMMISSIONER HILLER:
14 I would --
15 SENATOR LIU: Too many years.
16 DTF ACTING COMMISSIONER HILLER: I
17 would assume that these are transactions that
18 are taxable transactions but for this
19 exemption. And so if we were taxing them,
20 there would be revenue associated with them.
21 SENATOR LIU: Exactly.
22 DTF ACTING COMMISSIONER HILLER: But
23 we don't know how to quantify those because
24 we weren't taxing them before, so we don't
26
1 have a measure of them.
2 And the financial plan from --
3 (Overtalk.)
4 DTF ACTING COMMISSIONER HILLER: --
5 from when Dodd-Frank happened did not tax
6 them because they weren't taxable
7 transactions at that time.
8 SENATOR LIU: You're good. I'm out of
9 time.
10 (Laughter.)
11 SENATOR LIU: But I think we should
12 not continue to extend these exemptions for
13 these big Wall Street companies ad nauseam.
14 Thank you.
15 CHAIRWOMAN WEINSTEIN: So we've been
16 joined by Assemblywoman Simon.
17 And we go to the ranker on
18 Real Property, Assemblyman Miller.
19 ASSEMBLYWOMAN MILLER: Thank you,
20 Acting Commissioner Hiller, for your
21 testimony. It's always a pleasure.
22 DTF ACTING COMMISSIONER HILLER: Thank
23 you.
24 ASSEMBLYMAN MILLER: I've got one
27
1 question on the commercial security tax
2 credit.
3 And I just want to thank the Governor
4 for putting that in her budget. And I wish
5 it was a little bit more, because this
6 problem is truly out of -- out of proportion.
7 And, you know, a $3,000 tax credit's not
8 going to go a long ways for a lot of small
9 businesses, you know, with a hundred people
10 in, you know, locations.
11 But, you know, just some clarity on
12 some of the things that can be used for the
13 tax credit. We've got one for use of
14 security officers. So if they're already
15 using security officers, they can use the tax
16 credit for the '24-'25 tax year to help pay
17 for those?
18 DTF ACTING COMMISSIONER HILLER: A
19 taxpayer needs to have incurred $12,000 in
20 theft prevention expenses in order to qualify
21 for the credit.
22 And so I think that that would include
23 it, yes.
24 ASSEMBLYMAN MILLER: Okay. So if
28
1 they're already doing it and that's nothing
2 added --
3 DTF ACTING COMMISSIONER HILLER: I
4 don't think there's -- I don't think there's
5 a requirement that they be new expenses.
6 ASSEMBLYMAN MILLER: Okay.
7 Installation of security cameras,
8 we're talking about if they upgrade them?
9 That's eligible?
10 DTF ACTING COMMISSIONER HILLER: I
11 think that that would also be eligible.
12 ASSEMBLYMAN MILLER: Okay. And it's
13 perimeter security lighting, alarm systems,
14 access to control vaults -- these are all
15 great things, and I'm sure there's more
16 things out there.
17 But there's one question I have here
18 on other appropriate anti-theft devices as
19 determined by the Division of Criminal
20 Justice Services.
21 DTF ACTING COMMISSIONER HILLER:
22 Right.
23 ASSEMBLYMAN MILLER: So is that an
24 evolving list, or we don't know what it is?
29
1 Or if somebody comes up with a unique way of
2 crime prevention, that would be eligible?
3 DTF ACTING COMMISSIONER HILLER: I
4 think that that's the reason why -- you know,
5 I think that establishing a small, finite
6 list of eligible expenses would limit
7 businesses that may have specific security
8 needs that we haven't thought of.
9 And so this is a certified credit with
10 the Division of Criminal Justice Services,
11 because they're well-positioned to take in
12 applications and engage with businesses to
13 see whether an expense really was a theft
14 prevention expense that isn't on the list.
15 But we certainly don't want to
16 foreclose the credit for expenses that we
17 just haven't thought of yet or we forgot to
18 put on the list in the law.
19 ASSEMBLYMAN MILLER: Okay. Okay, so
20 the tax credit, that would be -- they could
21 file during their income tax?
22 DTF ACTING COMMISSIONER HILLER: Yes.
23 ASSEMBLYMAN MILLER: Okay.
24 That's all -- that's all the questions
30
1 I have. Thank you.
2 DTF ACTING COMMISSIONER HILLER:
3 Great.
4 CHAIRWOMAN WEINSTEIN: Thank you.
5 Back to the Senate.
6 SENATOR GOUNARDES: Great, thank you.
7 Next we'll go to Senator Weber for
8 five minutes.
9 SENATOR WEBER: Thank you,
10 Commissioner, for being here today. And
11 appreciate, you know, the back-and-forth that
12 we'll have.
13 So just a few questions in general.
14 Obviously we've seen and we continue to see
15 the outmigration of residents from New York
16 State over the last number of years. It
17 seems to be continuing on that trend. I know
18 the Executive's budget doesn't have any
19 increase in individual corporate taxes, which
20 I'm pleased to see and I think that's great.
21 But, you know, I've seen some
22 proposals and discussions, crazy proposals
23 and discussions about, you know, the desire
24 by some in this Legislature to raise taxes on
31
1 individual earners, corporate earners,
2 capital gains taxes, things of this sort.
3 You know, in 2021 I think there was --
4 it was the last time we had an increase in
5 the individual tax rates. And we continue to
6 see the outmigration. So do you think that
7 was a mistake? And do you see that -- would
8 you see that any increase in -- whether
9 individual, corporate, or any other taxes,
10 would continue that outmigration?
11 DTF ACTING COMMISSIONER HILLER: You
12 know, I think it's very hard to point to
13 causes for outmigration. I think -- you
14 know, I think we all at some time in our
15 lives have moved, and I think there are lots
16 of factors that go into that.
17 I will say -- you know, we have a
18 bunch of data on our website, our tax facts
19 data, and one of the things that we saw is
20 that when we increased the tax brackets for
21 the wealthiest New Yorkers in 2021, we did
22 see an increase in the outmigration of
23 taxpayers in those tax brackets that -- for
24 that tax year.
32
1 And it is returning to the sort of
2 more normal levels of outmigration after that
3 tax increase. So I read that to suggest a
4 possibility that those taxpayers who were
5 sensitive to that tax change, and that
6 taxpayers who weren't sensitive to that tax
7 change stayed. And are probably going to
8 continue to stay.
9 SENATOR WEBER: And would you amend
10 that if you saw a massive increase in those
11 rates now or in the next couple of years, you
12 know, knowing that we're going to have budget
13 shortfalls over the next couple of years,
14 that you would see a continual outmigration
15 of wealthier taxpayers?
16 DTF ACTING COMMISSIONER HILLER: I
17 certainly think that that's possible.
18 But I have a different set of concerns
19 about increasing the taxes at the highest tax
20 brackets, and that's that I think our tax
21 system is already overreliant on a very small
22 number of taxpayers. The millionaires in
23 New York comprise less than 1 percent of our
24 taxpayers; they pay about half of the tax
33
1 revenue.
2 We just completed the processing of
3 tax year 2022 returns, and we saw a
4 $7 billion decline in income tax revenue
5 because the economic fortunes of that very
6 small number of taxpayers declined that year.
7 And a $7 billion swing from one year to the
8 next is because we're incredibly reliant on
9 the taxes at the way top of our bracket.
10 We don't -- we have an incredibly
11 progressive tax system, but we don't have
12 smooth progressivity across the tax brackets.
13 And so if we -- if we increase our
14 reliance on the highest-earning taxpayers in
15 order to fund recurring spending commitments,
16 then we risk a bad year. You know, if the
17 end of the year is a bad year for capital
18 gains and now we don't have enough money and
19 we have a huge budget gap and we have to cut
20 programs and services we care about.
21 SENATOR WEBER: Putting all of our
22 eggs possibly in one basket, we'll continue
23 to have uncertainty in terms of the expected
24 revenue income coming in each year.
34
1 DTF ACTING COMMISSIONER HILLER:
2 Right. I mean, at the end of the day, I'm a
3 tax administrator, I administer the policies
4 that are set by the Legislature. And if the
5 Legislature decides that they are going to
6 increase tax brackets, then we will
7 administer those tax brackets.
8 But I am also pragmatic. We have a
9 visibility into where our tax dollars are
10 coming from, and they are overwhelmingly
11 coming from a very tiny sliver of New York
12 taxpayers. And so our budgets are riding on
13 that very small sliver.
14 And I don't know that increasing taxes
15 again would increase outmigration or not, but
16 that's certainly a risk to our financial plan
17 if we continue to rely on and further our
18 reliance on that very small handful of
19 taxpayers who are paying the freight in
20 New York.
21 SENATOR WEBER: Sure. And finally,
22 one other quick question.
23 So I've been a CPA in New York since
24 1994, so I've had a lot of experience with
35
1 not only IRS but New York State tax
2 departments. Now, being in government, we
3 get a lot of government calls to the office
4 related to residents' frustrations trying to
5 get through to agents within the department.
6 Is your department back to full
7 in-person? Or is there still remote working?
8 And has there been any improvements or any
9 improvements to be made in the future related
10 to, you know, customer service in terms of
11 people being able to get through to a live
12 agent?
13 DTF ACTING COMMISSIONER HILLER: So I
14 think that there are a couple of things.
15 One, many of our call center employees
16 are working remotely. They plug into a
17 digital platform at the beginning of the day,
18 and their day is entirely worked through that
19 digital platform. So it makes very little
20 difference whether they're sitting at a desk
21 in the Tax Department or sitting --
22 (Time clock chiming.)
23 DTF ACTING COMMISSIONER HILLER: -- in
24 their den at home.
36
1 I think many of the challenges
2 reaching tax agents is related to our civil
3 enforcement operations, where people are
4 trying to resolve bills, primarily. And we
5 are -- we have had staffing issues in that
6 function.
7 We have recently transferred many of
8 those calls to our call center, which is
9 better equipped to handle very low-level
10 calls, in order to free up staff in order to
11 be able to devote more of their attention
12 to --
13 (Overtalk.)
14 DTF ACTING COMMISSIONER HILLER: --
15 actually working those cases.
16 SENATOR GOUNARDES: Thank you.
17 CHAIRWOMAN WEINSTEIN: Thank you.
18 We go to our ranker, Assemblyman Ra.
19 ASSEMBLYMAN RA: Good morning,
20 Acting Commissioner.
21 So I wanted to start with asking about
22 the department and your approach and perhaps
23 whether you'd be, you know, amenable to
24 having more authority in this area.
37
1 There was an article -- I don't know
2 if you saw it -- a couple of days ago in the
3 New York Post regarding flavored vape
4 products. I'm just wondering, A, when the
5 department does go out on enforcement of
6 products that you are able to do enforcement
7 on, what is the approach if they were to see
8 an item like this that is not legal but is
9 not really within the purview of your
10 department to enforce that?
11 DTF ACTING COMMISSIONER HILLER: I
12 think we generally notify the Health
13 Department when we see flavored vape.
14 You know, I certainly am aware that
15 there is conversation about perhaps
16 empowering the Tax Department or assigning to
17 the Tax Department responsibility to enforce
18 some of our restrictions on vapor products.
19 We -- you know, under the current law
20 vapor tax does not have tax enforcement
21 provisions attached to it. We can audit a
22 registered vapor dealer's returns, but that's
23 really the limit of our role with vapor
24 enforcement.
38
1 But we do see vapor products --
2 nicotine-based vapor products -- when we're
3 doing tobacco inspections, and we do share
4 that information with the Health Department.
5 We do also see cannabis vape in our
6 cannabis enforcement, and we're seizing those
7 products.
8 ASSEMBLYMAN RA: Do you have any
9 opinion on whether it would make sense to
10 give the department that authority so you
11 could enforce all of them?
12 DTF ACTING COMMISSIONER HILLER: You
13 know, I feel like we're busy now. But I
14 also -- you know, I understand that there may
15 be some synergies with the tobacco
16 enforcement we're doing now.
17 I'm actually much more concerned about
18 the handling of the vapor products that are
19 being seized because those flavored vapor
20 products are coming in from out of the
21 country, in many cases, and we don't really
22 know what's inside them. And so I'm not
23 incredibly comfortable with the idea that a
24 bunch of accountants are responsible for
39
1 maintaining for years at a time, you know,
2 vapor cartridges that have unknown chemicals
3 inside them.
4 ASSEMBLYMAN RA: Thank you.
5 I wanted to ask you about convenience
6 rules. New Jersey, you may be aware, is
7 encouraging residents to challenge their
8 New York tax bills in a dispute over
9 New York's rules that treat out-of-state
10 remote workdays as New York workdays.
11 Is the department seeing an increase
12 in challenges over remote work?
13 DTF ACTING COMMISSIONER HILLER:
14 Absolutely.
15 ASSEMBLYMAN RA: Do you have any
16 statistics or --
17 DTF ACTING COMMISSIONER HILLER: You
18 know, I don't think we have statistics.
19 The first -- the first case that's
20 actually moving through litigation went to an
21 administrative law judge at the Tax Appeals
22 Tribunal in the first instance. That
23 administrative law judge ruled for the state,
24 and that's currently on exception to the
40
1 Tax Appeals Tribunal. I don't even think
2 we've finished briefing it yet.
3 I expect that that issue will
4 ultimately be resolved in our Court of
5 Appeals or in the Supreme Court. It's --
6 it's a significantly challenging issue.
7 New Jersey is offering tax credits to its
8 residents to challenge us. Connecticut has
9 just proposed to do the same, and -- in order
10 to encourage those challenges. And they're
11 doing that because when a New Jersey resident
12 is paying taxes to New York, New Jersey has
13 to provide a credit to the New Jersey
14 resident for the taxes that were paid to
15 New York. And Connecticut, the same.
16 And so that means there is actually a
17 financial burden on our neighboring states
18 when we're collecting those taxes on that
19 remote work.
20 ASSEMBLYMAN RA: Is the department --
21 or should the Legislature be taking any steps
22 to prepare for the possibility that our
23 convenience rules could be deemed
24 unconstitutional as this works its way
41
1 through?
2 DTF ACTING COMMISSIONER HILLER: You
3 know, I mean, we've certainly had discussions
4 within the Executive about that possibility,
5 although I do think that a court decision is
6 probably years away.
7 You know, we are also seeing changes
8 in the nature of work. Our convenience rules
9 have been in place since the fifties. Our
10 most recent guidance on the convenience rule
11 was issued before the iPhone. And so we
12 have -- you know, it may be that we need to
13 think hard as a state about where we want to
14 be on this question.
15 But I think it speaks more broadly to
16 how we interact with our neighbors who rely
17 on the New York City economy for their -- you
18 know, for their livelihoods.
19 ASSEMBLYMAN RA: Thank you.
20 And then just with the 20 seconds I
21 have left, following up on the Senator's
22 questions about outmigration, if you do have
23 any data just in terms of the number of
24 filers with incomes of more than a million
42
1 dollars per year, we have now as opposed to,
2 you know, before 2021, before they changed,
3 I'd be interested in seeing those, if you
4 could provide them.
5 DTF ACTING COMMISSIONER HILLER: We
6 have tax facts on our -- if you go to our
7 website, there's a "Data" home and we have
8 tax facts there that include a lot of
9 information about our income-tax payers,
10 about outmigration, about our corporate
11 taxes, our sales taxes. There's a lot of
12 data there.
13 ASSEMBLYMAN RA: Okay. Thank you.
14 CHAIRWOMAN WEINSTEIN: Senate?
15 SENATOR GOUNARDES: Great.
16 Next we're going to go to
17 Senator Borrello, three minutes.
18 SENATOR BORRELLO: Thank you,
19 Mr. Chairman.
20 Thank you for being here. Appreciate
21 it.
22 You know, you brought up, I thought, a
23 very honest evaluation of the loss in tax
24 revenue that we have here, income tax revenue
43
1 in particular. Tom DiNapoli, our
2 comptroller, sounded the alarm last year. He
3 was projecting I think it was second quarter
4 a 17 percent decline in revenue that turned
5 into a 50 percent decline, if I'm not
6 mistaken.
7 And -- but you brought up an important
8 point. We're going to hear from some folks
9 later that are going to tell us that, you
10 know, the rich need to pay their fair share,
11 their fair share. I hear that a lot. One
12 percent, the top 1 percent of earners, did
13 you say, are paying 50 percent of the income
14 tax? Is that correct?
15 DTF ACTING COMMISSIONER HILLER: I
16 think it's the top 2 percent of earners are
17 paying about 50 percent of our taxes.
18 SENATOR BORRELLO: So the problem
19 isn't that the rich aren't paying their fair
20 share, the problem is we're chasing the rich
21 out of New York State, the wealthy people.
22 That's what's lowering the income -- the
23 revenue.
24 DTF ACTING COMMISSIONER HILLER: I
44
1 think that that's -- it's probably not
2 really -- I don't think it's really that
3 simple. I think that our -- I mean, there's
4 also information on our website about the
5 composition of income of different income
6 tranches of New York taxpayers.
7 Our wealthiest taxpayers primarily
8 generate income from unearned income,
9 including capital gains and other unearned
10 income. And that means that their economic
11 fortunes from one year to the next depend on
12 economic circumstances that we don't get to
13 control very well. And that I think creates
14 risk for us.
15 I do think that we have seen
16 outmigration of New Yorkers generally, of
17 high-income New Yorkers included. I -- we
18 pay attention to high-income New Yorkers
19 because pragmatically they're paying the
20 taxes, and we're a tax department, so we pay
21 attention to where the tax dollars are going.
22 But outmigration is true across all income
23 tranches. Most New Yorkers are moving to
24 Florida. In general, people are moving to
45
1 southern, less-regulated states, although
2 they're certainly --
3 SENATOR BORRELLO: States with no
4 income tax also.
5 DTF ACTING COMMISSIONER HILLER: Well,
6 I think they are also states with income tax.
7 We certainly also see outmigration to our
8 immediate neighboring states.
9 But I think we also all anecdotally
10 know people who started their careers in the
11 city and then moved to New Jersey.
12 SENATOR BORRELLO: Yeah, that's true.
13 DTF ACTING COMMISSIONER HILLER: I
14 think that there's a pattern there.
15 SENATOR BORRELLO: I'm short on time.
16 I'm short on time, and I apologize to cut you
17 off. But I want to talk about the
18 projections that we've had recently.
19 You've seen projections in our budgets
20 and you've obviously had to deal with the
21 reality of the actual what comes in. Can you
22 tell us, you know, over the last, say, four
23 years what you've had to deal with as far as
24 what we project in our budget versus actually
46
1 what we earned? What kind of losses are we
2 talking about?
3 DTF ACTING COMMISSIONER HILLER: Well,
4 I actually think that in the last couple of
5 years our projections have been conservative,
6 and then upgraded as we moved through the
7 midyear updates to the financial plan.
8 I think that -- for example, we
9 thought that last year would be a very, very
10 difficult year, but at the end of the day the
11 stock market rallied, and that makes it a
12 better year for our tax receipts a little
13 bit.
14 And so one of the things I think,
15 again, that is a real challenge as we try to
16 project what our tax receipts are going to be
17 is that in the income tax, absolutely, but
18 also in our corporate taxes, even in our
19 sales taxes, we are concentrated with a small
20 number of taxpayers that are responsible for
21 the bulk of the taxes.
22 (Time clock chiming; overtalk.)
23 DTF ACTING COMMISSIONER HILLER: And
24 so small shifts in those taxpayers can have
47
1 big swings, and that's hard to predict and
2 project for years out.
3 SENATOR GOUNARDES: Thank you.
4 Assembly.
5 SENATOR BORRELLO: I agree. Thank
6 you.
7 CHAIRWOMAN WEINSTEIN: We go to
8 Assemblyman Mamdani.
9 ASSEMBLYMAN MAMDANI: Thank you,
10 Commissioner.
11 So your own tax website shows
12 6 percent of millionaires leaving in 2020 and
13 the rates falling in 2021 and 2022. Doesn't
14 this data show the migration rate of those
15 impacted by the 2021 tax increase declined?
16 DTF ACTING COMMISSIONER HILLER: I
17 think if you looked at the data on our
18 website -- well, one, I think we saw -- one
19 of the things that's challenging I think is
20 we think about migration right during this
21 particular set of years is that we had an
22 overlay of a COVID pandemic that hit New York
23 City first, and New York City is one of the
24 densest communities in the country. And we
48
1 didn't even understand COVID in those early
2 days, and I think we saw a ton of
3 outmigration that was just related to COVID.
4 And I think it -- it's intuitive to me
5 that the people who had the most resources
6 had the best ability to leave. And so I
7 think some of the migration data that's right
8 around the pandemic may be clouding what
9 other factors might drive migration.
10 I do think that we've seen a return of
11 many of the people that left the city. And
12 some of those people didn't leave the state,
13 they left the city for upstate and then they
14 moved back down to the city --
15 ASSEMBLYMAN MAMDANI: I'm sorry to
16 jump in, but just on the issue of time.
17 I very much do agree with you in the
18 analysis around the impact of COVID in this
19 period --
20 DTF ACTING COMMISSIONER HILLER: Sure.
21 ASSEMBLYMAN MAMDANI: And what I would
22 just bring up is that prior to COVID,
23 working- and middle-class New Yorkers were
24 leaving the state at a rate of four times as
49
1 much as the wealthiest New Yorkers. And now,
2 once we are emerging out of this pandemic,
3 we're seeing once again that working and
4 middle-class New Yorkers are leaving at
5 higher rates than the wealthy, whereas some
6 of the analysis around this departure is
7 attributing this to a tax increase when in
8 fact it's a pandemic.
9 DTF ACTING COMMISSIONER HILLER: Well,
10 I think if you looked at some of the data
11 that's -- from the most recent tax year
12 that's posted on our website, you can see
13 that there is increasing migration in the tax
14 brackets that were most affected by the 2021
15 tax increases. Those were post the height of
16 COVID, and so I don't think you can attribute
17 those migration rates to COVID itself.
18 And -- but I also, I think, you know,
19 they dropped back down afterwards. So I
20 attribute that people who were sensitive
21 left, and the people who weren't sensitive
22 didn't leave. That's how I read it.
23 But I think it's important to
24 understand that New York has had net
50
1 outmigration for many, many years across all
2 of our income tranches, including low-income
3 New Yorkers, middle-income New Yorkers,
4 wealthy New Yorkers. One of the things that
5 I find --
6 ASSEMBLYMAN MAMDANI: I'm just going
7 to jump in because I only have 30 seconds
8 here --
9 DTF ACTING COMMISSIONER HILLER: Sure.
10 ASSEMBLYMAN MAMDANI: -- just to say
11 that given that it is still remarkable that
12 we have gained more than 17,500 additional
13 millionaires over the last four years, given
14 that existing statistic you were speaking of.
15 The last thing I would just say, with
16 the 20 seconds that I have, is when we're
17 looking at an analysis of where the top
18 1 percent of earners are going if they are
19 leaving New York, we're seeing Connecticut,
20 New Jersey, California. This is the
21 statistics that we have in front of us of
22 28 percent, 27 percent, 22 percent -- and
23 then 9 percent Florida.
24 DTF ACTING COMMISSIONER HILLER: I
51
1 think it -- it depends on how you measure
2 those tranches. But I think, you know, if
3 you define a tranche as being over $200,000,
4 then you see more movement to New Jersey.
5 And if you define a tranche as being
6 over a million dollars, you see more movement
7 to Florida.
8 And so one of the things that I've
9 come to understand about the debate about
10 taxes and migration is that there is data to
11 support every viewpoint out there.
12 (Laughter; overtalk.)
13 DTF ACTING COMMISSIONER HILLER: And I
14 think that that's an important context.
15 CHAIRWOMAN WEINSTEIN: And with that,
16 we can go to the Senate now. Thank you.
17 SENATOR GOUNARDES: Thank you.
18 Next we're going to have
19 Senator Hoylman for three minutes.
20 SENATOR HOYLMAN-SIGAL: Thank you,
21 Mr. Chair.
22 Good to see you.
23 Regarding outmigration, which
24 obviously is a question that is on a few
52
1 minds here, do you interview or speak to
2 individuals who do choose to leave the state?
3 Is there any type of analysis other than just
4 looking at their departure that you deploy to
5 understand what the impact of taxes is? As
6 you mention, there are so many other factors,
7 including age and weather, that results in
8 the constant outmigration to Florida that
9 we've seen for decades among New Yorkers.
10 DTF ACTING COMMISSIONER HILLER: I
11 mean, we don't -- we don't systematically
12 survey taxpayers who have left. But we also
13 -- we also -- many of the taxpayers who have
14 left --
15 SENATOR HOYLMAN-SIGAL: I might
16 suggest you do that.
17 DTF ACTING COMMISSIONER HILLER:
18 Right, but we also -- many of the taxpayers
19 who have left, we are engaging with in
20 ongoing audits with those taxpayers. And so
21 they tell us, as we are engaging with them
22 and their tax practitioners --
23 SENATOR HOYLMAN-SIGAL: Good.
24 DTF ACTING COMMISSIONER HILLER: --
53
1 why they left.
2 (Overtalk.)
3 SENATOR HOYLMAN-SIGAL: Well, if
4 you're lacking data and information, I would,
5 you know --
6 DTF ACTING COMMISSIONER HILLER: Sure.
7 I mean, we can certainly look at that. I
8 mean, I'm not opposed to the idea of trying
9 to do that. I don't know what response rates
10 we'll get from the people who are no longer
11 connected to New York taxes. I think we get
12 better responses from people who do have an
13 obligation to us than the people who have
14 left and stopped having an obligation to us.
15 SENATOR HOYLMAN-SIGAL: Because there
16 is -- there does seem to be conflicting
17 information. And as -- after all, I mean,
18 you know, we have a budget surplus this year,
19 and it runs counter to a lot of arguments
20 before and after the pandemic that the sky is
21 falling and taxes are too high and we're
22 pushing out those who have the ability to
23 pay.
24 And on that point, the Fiscal Policy
54
1 Institute has shown that millionaire earners
2 pay 44 percent of the state's income tax
3 revenue and earn 35 percent of all personal
4 income earned in New York. That would seem
5 somewhat proportionate, correct?
6 DTF ACTING COMMISSIONER HILLER: I'm
7 not -- I'm not -- so I don't -- I don't have
8 an opinion about whether they're paying their
9 fair share or not their fair share. That's a
10 policy decision that the Tax Department
11 doesn't get to make.
12 But I do know that we are heavily
13 reliant on that upper tranche. And again, we
14 have updated data through tax year '22 that
15 just came -- we just were able to put that
16 out last week, maybe. You know, because we
17 finished the -- we got 2022 returns in
18 October, so as we finish processing them, we
19 can roll out '22. But that data is always
20 retrospective.
21 I would also note that we have budget
22 surpluses because we've budgeted
23 conservatively against lower revenue
24 expectations. And then when the revenue
55
1 expectations turned out to be rosier --
2 although not rosy. They are rosier than we
3 originally projected. And I think that
4 that's part of what's tricky about trying to
5 project our tax receipts are reliant on the
6 economic fortunes of a handful of people.
7 CHAIRWOMAN WEINSTEIN: Assemblyman
8 Dilan.
9 ASSEMBLYMAN DILAN: Thank you,
10 Madam Chair.
11 I just had a brief follow-up on a
12 question that Chair Williams posed, and it's
13 about the creation of the new tax abatement
14 for rental construction housing.
15 DTF ACTING COMMISSIONER HILLER: Sure.
16 ASSEMBLYMAN DILAN: This is my
17 opinion. I believe this is exactly where tax
18 policy should be focused, on rentals, because
19 that's where the demand is.
20 But I wanted to dig deep down more
21 about the abatement itself. Like how deep is
22 the abatement? For how long does it last?
23 Are there targeted levels of affordability in
24 the housing that we are asking folks to
56
1 create? Could you tell us more mechanically
2 about how this abatement would work?
3 DTF ACTING COMMISSIONER HILLER: I
4 actually can't. I wish I could. But I --
5 this is a housing policy initiative that
6 was --
7 ASSEMBLYMAN DILAN: But it's also tax
8 policy that you would have to administer
9 and --
10 DTF ACTING COMMISSIONER HILLER: We --
11 we -- the Tax Department actually would not
12 have a role in administering this tax policy.
13 It would be a real property tax abatement
14 administered by New York City.
15 And traditionally the real property
16 tax abatements related to housing are
17 negotiated at the housing table. So I
18 suspect that Commissioner Visnauskas will be
19 better positioned to answer questions about
20 these particular proposals.
21 ASSEMBLYMAN DILAN: Thank you.
22 Thank you, Madam Chair.
23 CHAIRWOMAN WEINSTEIN: Senate.
24 SENATOR GOUNARDES: Next we'll hear
57
1 from Senator Murray, three minutes.
2 SENATOR MURRAY: Thank you, Chairman.
3 Commissioner, I'm going to change
4 scenes here and move to the film tax credit.
5 So your department actually recently
6 released a study that was commissioned to the
7 PFM Group -- I think it was like 359 pages --
8 looking at the major tax incentives that have
9 been given out to different programs. It
10 looked like the Excelsior job program did
11 pretty good, but the film tax credit looks
12 like an abysmal failure here.
13 It says that the investment returns
14 31 cents on the dollar. Now, with such a low
15 return on investment, wouldn't it be wise
16 maybe to stop this program, get that revenue
17 in and maybe recoup some of that money for,
18 say, schools, where we've cut -- the
19 Governor's proposing cutting funding to
20 schools? Or maybe things -- programs like
21 the Healthy Meals for All, that would cost us
22 about 90 million.
23 The Legislature last year increased
24 this tax credit, a tax credit that obviously
58
1 is failing, from 520 million to $700 million.
2 Why would we continue with a program that's
3 returning 31 cents on the dollar?
4 DTF ACTING COMMISSIONER HILLER: I
5 think that that's a question for the
6 Legislature. I certainly don't think that
7 the Tax Department can answer that question.
8 I will say a couple of things about
9 that study. The Tax Department was assigned
10 the responsibility for commissioning and
11 overseeing the development of that study, and
12 I'm proud to say that we were actually
13 independent. It is an independent study. We
14 did not reach in in any way into the analysis
15 that was done.
16 I think the limits of our involvement
17 was working to make the final report
18 accessible for people with visual impairments
19 on the web.
20 The -- a couple of notes, though.
21 One, I think the consultants, by their own
22 admission, took a very conservative approach
23 to measuring return on investment and were
24 only looking at the dollar-for-dollar state
59
1 return on -- in state dollar terms, even
2 though the report does develop projections
3 for county and local taxes that are also the
4 result of those incentives.
5 And that it's worth taking a look at
6 the all-in numbers to get I think a broader
7 picture of the return on investment --
8 SENATOR MURRAY: I'm going to
9 interrupt you there only because of time.
10 But there was another study previously that
11 others are pointing to saying that, oh, it's
12 a wonderful program. But that study -- and
13 sort of like your comment earlier that, you
14 know, we adjusted statistics to make whatever
15 argument fits.
16 But this study seems to be much more
17 in depth. The study previously was like a
18 16-page study that said basically if there
19 was no film tax credit, no jobs would have
20 been created. Which is absurd. This one
21 takes a more I think realistic approach to
22 this. But again, it shows that the
23 investment is just -- the return on
24 investment is just not there.
60
1 Would you agree with that analysis
2 based on the information in this report?
3 DTF ACTING COMMISSIONER HILLER: I
4 think that the report's commentary on the
5 film credit, as with most of the credits it
6 looked at, was that in addition to the direct
7 dollar-for-dollar return on investment, there
8 are also quantitative benefits for each of
9 those incentives.
10 Ultimately whether or not those
11 incentives are the right incentives for
12 New York are decisions that the Tax
13 Department will administer, but we don't
14 decide.
15 SENATOR GOUNARDES: Thank you,
16 Commissioner.
17 Assembly?
18 CHAIRWOMAN WEINSTEIN: Assemblyman
19 Braunstein.
20 ASSEMBLYMAN BRAUNSTEIN: Thank you,
21 Commissioner.
22 First, my colleague Mr. Ra went over
23 my concerns about the shift to working from
24 home. And I appreciate that you recognize
61
1 that that's a challenge that we need to
2 confront as the legal process plays out.
3 My other question is obviously we're
4 all concerned about outmigration of the tax
5 base. In your opinion, has the cap on the
6 state and local tax deduction had any impact
7 on migration?
8 DTF ACTING COMMISSIONER HILLER: You
9 know, we started looking at migration
10 patterns when that cap was put in place. And
11 I think that we do see some changes in
12 outmigration behavior that followed the
13 institution of that cap.
14 I think -- as with our specific tax
15 rates and tax brackets -- it's very difficult
16 to tease out whether the state and local
17 deduction has an impact.
18 I think it's also especially difficult
19 now, because I think the taxpayers who were
20 most impacted by the cap on state and local
21 tax deductions now have the opportunity to --
22 many of them have the opportunity to leverage
23 the PTET program to help reduce their state
24 tax liabilities. And so I think that changes
62
1 the picture for them.
2 ASSEMBLYMAN BRAUNSTEIN: Okay, thank
3 you.
4 SENATOR GOUNARDES: Next we'll hear
5 from Senator O'Mara, for five minutes.
6 SENATOR O'MARA: Good morning,
7 Commissioner.
8 I've got a couple of questions on the
9 change to the cannabis tax. Well, first of
10 all, where are the cannabis tax receipts
11 compared to what was projected?
12 DTF ACTING COMMISSIONER HILLER: You
13 know, I don't have the specific numbers
14 offhand. But they are obviously much lower
15 than originally projected, because we just
16 haven't seen the rollout that we originally
17 anticipated.
18 You know, I think that, you know, the
19 state has prevailed in some of the more
20 recent legal challenges and that we're in a
21 position to start rolling out licenses
22 faster. And I remain of the belief that the
23 best way to combat the illegal market is to
24 have a robust legal market. So I'm excited
63
1 that we seem to be gaining momentum on the
2 legal stores.
3 SENATOR O'MARA: Very slowly gaining
4 momentum, in my opinion. And really getting
5 no traction on, frankly, eliminating the
6 illegal sticker shops that are out there, at
7 least in communities that I represent.
8 It's very embarrassing, from where I
9 sit as a state legislator, when I'm in my
10 district and people want to know what's going
11 on. I mean, it's just -- it's embarrassing,
12 the whole program.
13 To change to -- to get away from the
14 THC level taxing, what's that impact going to
15 be to tax receipts from cannabis overall?
16 DTF ACTING COMMISSIONER HILLER: From
17 my -- you know, so one, I think that the
18 movement from the THC tax to a price-based
19 tax will be an incredibly important
20 simplification of the tax. Because
21 especially for cannabis growers who are
22 selling flower, cannabis flower. Every batch
23 has to be tested, and the testing is really
24 expensive, hard to get, and unreliable. And
64
1 so that makes the taxing really
2 unpredictable.
3 SENATOR O'MARA: Don't they -- they
4 have to label the THC content on it, like
5 liquor has a proof on it. So it still has to
6 be appropriately labeled.
7 DTF ACTING COMMISSIONER HILLER:
8 Absolutely.
9 SENATOR O'MARA: So why isn't it taxed
10 on -- just simply taxed on what it's labeled
11 as? And if there's periodic testing and it
12 proves to be different, then you change the
13 label and the tax level changes.
14 DTF ACTING COMMISSIONER HILLER: I
15 think that that's -- you know, I think I made
16 that argument at a hearing on cannabis in
17 November.
18 But I also recognize that the testing
19 is very difficult to get, and it's incredibly
20 expensive. And then we know that it's not
21 very reliable. So that combination I think
22 is not a great way to administer taxes.
23 And we have the opportunity to -- you
24 know, that was the original idea when we
65
1 first legalized adult use cannabis in
2 New York. And we've had a few years of
3 experience and have the opportunity to move
4 to a different tax structure. I think that
5 now's the time to make that move, as the
6 legal industry is getting going.
7 And, you know, I think that in terms
8 of the revenue for --
9 SENATOR O'MARA: I think changing
10 before we really have the market established
11 doesn't make sense. I mean, there was a
12 reason it was put in in the first place.
13 But I want to move on from the
14 cannabis, in the remaining time I have, to
15 taxes on manufacturers. And I forget how
16 many years ago it was -- six, eight years
17 ago -- we eliminated the franchise taxes on
18 C-corporation manufacturers. And there's
19 proposals out there that I have and others
20 have to eliminate that on the pass-through
21 entities, whether it's a partnership, an LLC,
22 a subchapter S corporation.
23 Have you looked, from your perspective
24 as commissioner of the Tax Department, at
66
1 what impact that would be? And how could
2 that feasibly be done to give a further break
3 to smaller manufacturers in the state?
4 Because my understanding is they make up like
5 75 percent of the manufacturing entities in
6 the state. And we certainly I think want to
7 foster manufacturing in New York State.
8 DTF ACTING COMMISSIONER HILLER: Well,
9 certainly I think we see the -- you know,
10 changes in the patterns of business formation
11 over -- you know, historically, you know,
12 from C-corporations as new businesses are
13 increasingly structured as flow-through
14 entities.
15 I'm aware that there are proposals to
16 try to bring the same kind of tax relief to
17 flow-through manufacturers as we have for
18 C-corp manufacturers. At the Tax Department
19 that makes us nervous, and that's because
20 it's hard to tell what's a manufacturer.
21 And it's hard for us, from where we
22 sit on a tax filing, to determine whether
23 that entity was a manufacturer or not. We
24 have a little bit more -- the group of C-corp
67
1 manufacturers is at this point fairly well
2 understood. But the flow-through
3 manufacturers is a much more unwieldy pool.
4 And so if we're going to move in that
5 direction, I would encourage the Legislature
6 to consider working with SED to have
7 certified manufacturers. And if we have
8 certified manufacturers, we have people with
9 expertise and able to determine whether this
10 entity is a manufacturer that should get a
11 tax break.
12 SENATOR O'MARA: Yeah, I think that
13 could definitely be done. So -- but thank
14 you. I think we should prioritize our
15 manufacturers, the base of our economy.
16 Thank you.
17 SENATOR GOUNARDES: Thank you,
18 Commissioner.
19 Assembly?
20 CHAIRWOMAN WEINSTEIN: Hello. So I
21 have just a couple of short questions.
22 The -- it was brought up I think by
23 Assemblyman Miller, the commercial security
24 tax credit. And a number of my colleagues
68
1 are concerned that both the $12,000 spending
2 before the credit kicks in, and the hundred
3 or less employees, will really prevent a lot
4 of the small individual businesses from being
5 able to take advantage of this credit.
6 And I was just wondering if you had
7 thoughts on why the $12,000 limit -- or
8 kick-in, really, was chosen, and why up to
9 100 employees. And your thoughts on whether
10 perhaps to have a two-tier system for smaller
11 individual businesses that maybe have only
12 five, seven or 10 employees and they'll never
13 get to that $12,000 limit, and some of those
14 sort of mom-and-pop stores that are having a
15 lot of issues won't be able to take advantage
16 of this credit.
17 DTF ACTING COMMISSIONER HILLER: My
18 understanding is that the 100-employee cap
19 was established because that's how we define
20 small businesses. In economic development
21 terms, I think ESD and others look at that as
22 being a threshold for being small businesses.
23 And I think it's also, for many of
24 particularly our small retail businesses,
69
1 their payrolls -- you know, I may go into the
2 store and only see three people, but most of
3 those employees are part-time employees and
4 there's a rotation of part-time employees,
5 and the actual employee count is higher.
6 In terms of the spending cap, you
7 know, I think that this is -- the intention
8 here I think was to provide cost-sharing to
9 help incentivize the investment in these
10 kinds of security initiatives to help prevent
11 retail theft without absorbing all of the
12 cost of those initiatives. And I think that
13 the -- essentially a 25 percent cost-sharing
14 is what was the original proposal.
15 I expect this will get negotiated at
16 the table, and there may be some variation in
17 that, in the ultimate credit.
18 But I think this is one part of a
19 larger series of initiatives that the
20 Governor has proposed to try to address the
21 retail theft that we're seeing. And, you
22 know, it's an important piece but it's only
23 one piece of a larger series of proposals
24 that the state is undertaking in order to try
70
1 to address this growing scourge.
2 CHAIRWOMAN WEINSTEIN: And -- thank
3 you for that answer.
4 You know, we've heard people talk
5 about how New York State is gaining
6 millionaires. I assume that it's not a
7 number of millionaires moving into New York
8 State, but people who have been taxpayers who
9 have been below that amount and, as the
10 economy has improved for some people, that
11 they are now over the million-dollar income
12 threshold, where before they were taxpayers
13 below a million dollars.
14 Is that a correct assumption?
15 DTF ACTING COMMISSIONER HILLER:
16 That's actually right on target. We do not
17 see in migration, meaningful in-migration of
18 millionaires into New York.
19 What we -- you know, we have -- we're
20 talking first -- you know, when we're talking
21 about millionaires, we're talking about
22 income millionaires, not wealth millionaires.
23 We have people who have homes that are worth
24 a million dollars, but they don't have income
71
1 of a million dollars a year.
2 And a large number of them, they're
3 just above a million this year, they're just
4 below a million next year. It's a great
5 capital gains year, it was a good bonus year,
6 they're above a million. The next year their
7 bonus is down and they're below a million.
8 And so we see that fluctuation.
9 We also see a pattern that has been a
10 longstanding pattern in New York of people
11 who make their fortune in New York and then
12 retire to Florida. And that's not new.
13 People who started out in a business and by
14 the time they retired, that business was
15 generating a million dollars a year, and then
16 they leave. I think that we see all of those
17 kinds of patterns.
18 The one thing I think that's
19 incredibly important to keep in mind, though,
20 as we think about migration and outmigration
21 is that when you look at the in-migration,
22 the outmigration from New York and the
23 outmigration from Florida, they aren't
24 actually all that different. The difference
72
1 is that people are moving to Florida and
2 people are not moving to Florida.
3 Millionaires aren't moving to New York;
4 lower-income people aren't moving to
5 New York.
6 That doesn't surprise me. The vacancy
7 rate in New York City is at historic lows.
8 You can't get an apartment in New York. But
9 we aren't seeing the in-migration that
10 balances the outmigration we see every year.
11 In other states, that in-migration and
12 outmigration is more balanced or, in the case
13 of Florida, the in-migration vastly
14 overwhelms the outmigration from Florida.
15 But the numbers aren't all that different.
16 The number leaving Florida, the number
17 leaving New York, it's within -- you know,
18 some years we're above, some years we're
19 below.
20 It's not -- that's not where the
21 problem is. The problem is that we aren't
22 bringing people in to replace the people who
23 are leaving.
24 CHAIRWOMAN WEINSTEIN: Thank you.
73
1 And just to follow up on
2 Senator O'Mara's questions about the
3 inspections of the illegal cannabis, do you
4 have enough staff to do those inspections?
5 And are -- I guess just that question.
6 DTF ACTING COMMISSIONER HILLER: I
7 think if we had more peace officers, we would
8 be able to do more inspections. And we are
9 working to grow our peace officer class. I
10 was just at a peace officer graduation two
11 weeks ago.
12 And, you know, we're bringing on
13 another new class of peace officers. But it
14 takes time to recruit and train new peace
15 officers. And so we're moving through that
16 process expeditiously in order to sort of
17 grow the ranks, because we not only are doing
18 cannabis enforcement, we're still also doing
19 tobacco enforcement.
20 And tobacco -- we have the highest
21 tobacco taxes in the country, and so the
22 incentive to bring in untaxed tobacco is
23 enormous. And so we can't stop doing tobacco
24 enforcement while we undertake cannabis
74
1 enforcement. And so we are working to grow
2 our ranks.
3 I was incredibly excited by the
4 graduation of that new class. We have a
5 great new team of people coming on board.
6 And we're going to be continuing to recruit
7 new peace officers to do that work.
8 CHAIRWOMAN WEINSTEIN: Thank you.
9 Thank you for your responses.
10 To the Senate.
11 SENATOR GOUNARDES: Okay, we're done
12 on our side, so I'll take some time for some
13 questions.
14 Commissioner, I want to follow up on
15 what I guess has been the theme of today so
16 far on this question of migration,
17 in-migration, outmigration, tax code,
18 et cetera.
19 You know, I guess the first thing I'll
20 ask or I'll start with is, you know, there
21 does seem to be, based on the data on the
22 department's website, as well as, you know,
23 on the press reported analysis of that data,
24 a net increase in about 15,000 millionaire
75
1 filers in the same period that we lost about
2 2500 millionaire filers for whatever
3 reason -- they retire, they move, COVID,
4 et cetera. So we have seen an increase in
5 those -- in the number of people who are
6 supporting that tax base. I think that's an
7 important fact to just keep in mind.
8 Whether someone is coming in here or
9 is already here and they're paying, arguably,
10 their fair share or part of their fair share
11 I think is ultimately the most important
12 question for our financial plan. Right?
13 Whether you are a former Wisconsin resident
14 who's paying the tax in New York or you're a
15 New Yorker who's done very well and now
16 you're paying that tax, it's still a part of
17 our broader plan.
18 And so arguably, at the end of the
19 day, whether you're coming from somewhere
20 else or you're here and you're doing well, we
21 still want you to be paying your fair share.
22 And, you know, you had kind of alluded
23 to, you know, the 1 percent pay 50 percent
24 and that the highest earners are already
76
1 doing significantly -- or paying a
2 significantly higher share of their taxes,
3 and that when they don't do well, we all do
4 less well.
5 But the opposite's also true, that
6 when they do very well, we all do very well.
7 Correct?
8 And, you know, nine months ago we were
9 looking at a $9 billion deficit. Then in
10 October it was 4 billion. Now we have a
11 balanced budget. The Budget Department says
12 it's because of the stock market, which grew
13 24 percent last year.
14 So when the well-to-do are doing well,
15 it benefits everyone. So isn't that an
16 argument for, you know, we should not make
17 changes to lessen the burden that is being
18 asked of the most privileged and wealthiest
19 New Yorkers?
20 DTF ACTING COMMISSIONER HILLER: Well,
21 first, I'm not aware of any proposals to
22 lessen the burden on the people who are doing
23 well (laughing).
24 SENATOR GOUNARDES: (Inaudible.)
77
1 DTF ACTING COMMISSIONER HILLER: You
2 know, the conversation I have heard is about
3 proposals to increase that burden.
4 You know, I'm a New Yorker, I want
5 people to all pay their fair share. I
6 believe in progressive taxes. New York is a
7 high-tax, high-spend state, and I'm proud of
8 that. You know, there are states in other
9 parts of the country that do not provide
10 services to their residents, and I'm pleased
11 that we step up to provide services to people
12 who need assistance.
13 That I don't think is the question. I
14 think for me, separate from whether or not
15 people are paying their fair share -- however
16 one defines fairness -- I think the real
17 question is built into your question. And
18 that's whether our financial plan is stable
19 from one year to the next when we're funding
20 recurring expenditures.
21 And so if --
22 SENATOR GOUNARDES: On that point,
23 Commissioner, so I understand that we want to
24 have as smooth a kind of financial plan as
78
1 possible. Even with the increases over the
2 last couple of years that we've seen in
3 spending, education spending, childcare
4 spending, healthcare spending, et cetera, you
5 know, at the same time we've managed to sock
6 away $20 billion which we didn't have two or
7 three years ago.
8 So we've been able to pay for the
9 things we need to pay for -- arguably maybe
10 not pay for enough of the things we pay
11 for -- while still putting away a significant
12 number of reserves based on the current
13 structure of the tax system and tax code.
14 So I guess I'm wondering, you know,
15 why would we or why should we not continue
16 down that road and continue to structure our
17 taxes in that way, and perhaps arguably try
18 to raise a little bit more to pay for those
19 things that are remaining unmet needs that
20 we're facing right now?
21 DTF ACTING COMMISSIONER HILLER: Well,
22 I think there are a couple of different
23 things there. One, I think that we were all
24 surprised by the strength of the stock market
79
1 in the pandemic. I think that economists
2 widely attribute that to the infusion of
3 federal funds into the economy to support the
4 economy. And that left us with surprisingly
5 strong revenues during some of our darkest
6 times.
7 And I'm glad to see that we were able
8 to put a lot of those resources into
9 reserves, because it could -- that could have
10 been a very different story and I think a lot
11 of us feared it would be a very different
12 story. And so having reserves in place to
13 help us steel ourselves against another
14 disaster like that and another crisis like
15 that I think is incredibly important.
16 But again, I think the issue is when
17 we have access to resources, there are ways
18 to do one-time spending to spend those
19 additional resources. I mean, we've done
20 supplemental earned income tax credits,
21 supplemental dependent care credits,
22 additional homeowner rebate credits that are
23 not recurring expenses but can help us do
24 revenue-sharing to our lower-income residents
80
1 that are distributing some of that
2 unanticipated fund balance that we have.
3 There are ways that we can do that
4 that don't create recurring expenditures when
5 we're fortunate enough to have that. But
6 when we build our school aid formula on
7 revenues that are uncertain, then we have
8 problems in the next year in how we go about
9 funding that in the future. And I think that
10 that's true across our spending categories.
11 SENATOR GOUNARDES: So I appreciate
12 that. I understand. I would say that that's
13 one of the reasons why we have the reserves,
14 to kind of allow us to smooth out, right?
15 Which is why it's there.
16 DTF ACTING COMMISSIONER HILLER: Sure.
17 SENATOR GOUNARDES: I want to just get
18 clarity. When we say that the top 1 percent
19 pays 50 percent, is that 50 percent of the
20 income taxes or is that 50 percent of the
21 entire tax levy on individuals?
22 DTF ACTING COMMISSIONER HILLER: So,
23 one, I would want to be clear. I think we
24 say about 2 percent of the taxpayers, the top
81
1 200,000 taxpayers.
2 SENATOR GOUNARDES: Earlier I think
3 you said 1 percent, but --
4 DTF ACTING COMMISSIONER HILLER: Well,
5 I think New York millionaires are less than
6 1 percent.
7 But that top 200 -- we have about
8 84,000 millionaires in New York. But if you
9 move to the top 2 percent, which is those
10 84,000 millionaires plus people who are just
11 below a million, you get to that --
12 essentially that 2 percent number, and they
13 pay about half.
14 It just shift a little bit from when
15 you --
16 SENATOR GOUNARDES: Half of the
17 personal income --
18 DTF ACTING COMMISSIONER HILLER: Half
19 of the personal income tax.
20 SENATOR GOUNARDES: Okay.
21 DTF ACTING COMMISSIONER HILLER: But
22 we also can see that the largest corporate
23 taxpayers pay a disproportionate amount of
24 corporate taxes. We see that a small handful
82
1 of sales tax vendors are responsible for most
2 sales tax revenue. We do have concentration
3 in our key taxes.
4 SENATOR GOUNARDES: And on the --
5 looking, for example, at the capital gains
6 tax, which arguably is what gave us a big
7 boost because we tax capital gains as income
8 here, what kind of carried us from the red to
9 the black, what percentage of the capital
10 gains tax is paid by the people in the top
11 2 percent, are the millionaire class and
12 above?
13 DTF ACTING COMMISSIONER HILLER: Oh, I
14 think it's overwhelmingly.
15 I mean, I don't know that number
16 offhand. We'd have to do some serious
17 analysis within our tax returns in order to
18 try to pull that out. But --
19 SENATOR GOUNARDES: Isn't --
20 DTF ACTING COMMISSIONER HILLER: But
21 we do see that different -- we've looked at
22 different wealth sources for income sources
23 by income tranche, and you can see that it's
24 overwhelmingly unearned income amongst our
83
1 wealthiest taxpayers.
2 SENATOR GOUNARDES: All right, thank
3 you. I want to shift to another topic here.
4 In the Governor's proposal, Part A,
5 she proposes to extend the limitation on
6 charitable deductions at 25 percent of the
7 federal limit. Otherwise, it would shoot up
8 to 50 percent. And I guess my first question
9 is, do we know, do we have an analysis, has
10 your department done an analysis what the
11 revenue gain to the state would be if we
12 eliminated that deduction entirely?
13 Because I think they're projecting
14 175 million increased revenue next year and
15 beyond by continuing that --
16 DTF ACTING COMMISSIONER HILLER: I
17 think it may be 350 million full year. I
18 mean, it's a substantial -- I mean the
19 reduction in this deduction has a substantial
20 impact on our revenue stream.
21 I don't know offhand what it would be
22 if we eliminated the charitable deduction
23 completely for these sectors.
24 SENATOR GOUNARDES: I think the
84
1 proposal is just for people with incomes over
2 $10 million.
3 So we're talking about, as I -- as I
4 read the proposal, right -- so people making
5 10 million or above get to deduct 25 percent
6 of their charitable contributions on their
7 state tax return.
8 DTF ACTING COMMISSIONER HILLER: We --
9 right. We have a permanent limitation of
10 50 percent. And then we're extending the
11 highest-dollar taxpayers -- the reduction to
12 25 percent for our highest-dollar taxpayers.
13 I don't know what it would look like
14 if we completely eliminated the charitable
15 deduction for those taxpayers. I think we
16 could certainly do that -- work that up and
17 get that to you. I don't know that offhand.
18 I do also know that, you know,
19 charitable contributions in New York are
20 important to sustain some of our service
21 providers in New York. And so I think
22 that -- you know, I don't know where the
23 balance is, where the value of the federal
24 deduction, which may be limited by the
85
1 alternative minimum tax at the federal level
2 for some of our -- these donors, what the
3 tradeoff is for that.
4 SENATOR GOUNARDES: Sure.
5 DTF ACTING COMMISSIONER HILLER: I
6 would hope that they're philanthropic
7 regardless of the tax status of their
8 donations, but I don't know that.
9 SENATOR GOUNARDES: I guess the
10 question is, what is the public policy
11 rationale for subsidizing charitable
12 donations of multimillionaires?
13 We want people to be able to donate to
14 their local YMCA and to their local Boy
15 Scouts and Girl Scouts and to the food bank,
16 and we want folks to be able to do that. But
17 if you are a multimillionaire, I guess I
18 question what the public policy rationale is
19 of subsidizing your largesse to the libraries
20 and the parks, which arguably wouldn't need
21 those donations if we had fully funded them
22 through tax revenue in the first place.
23 So I don't know if you can speak to
24 the public policy rationale of -- I'm glad
86
1 we're trying to maintain what we currently
2 have, but why not do something different?
3 DTF ACTING COMMISSIONER HILLER: You
4 know, I can't speak to the public policy
5 rationale because it's set by you, not by me.
6 SENATOR GOUNARDES: Or the Governor's
7 proposal, in this case.
8 DTF ACTING COMMISSIONER HILLER:
9 Right. Well, the Governor's proposal in this
10 case is to extend, you know, sort of what's
11 now become a longstanding limitation.
12 I would also -- you know, I think we
13 could ask the question of whether we as a
14 matter of public policy want to have
15 deductions for charitable contributions at
16 all for any level. But I think our
17 wealthiest taxpayers also make the largest
18 donations, and that that's part of a -- of a
19 web of nonprofits that play an important role
20 in our economy and in our communities.
21 SENATOR GOUNARDES: Great. Thank you.
22 I think we have --
23 CHAIRWOMAN WEINSTEIN: We have one
24 more questioner on the Assembly side.
87
1 Assemblywoman Simon.
2 ASSEMBLYWOMAN SIMON: Thank you.
3 DTF ACTING COMMISSIONER HILLER: Good
4 morning.
5 ASSEMBLYWOMAN SIMON: Thank you for
6 your testimony.
7 DTF ACTING COMMISSIONER HILLER: Of
8 course.
9 ASSEMBLYWOMAN SIMON: Actually I
10 understood most of it, which is good.
11 Because the last time I understood anything
12 on tax, it was my tax class.
13 DTF ACTING COMMISSIONER HILLER:
14 You're not alone.
15 ASSEMBLYWOMAN SIMON: And as soon as
16 the final was over, I forgot it.
17 So I have a couple of questions about
18 some proposals that the Governor has and
19 whether you've been part of this analysis and
20 what that might be.
21 So one is to authorize tax incentive
22 benefits for converting commercial property
23 into affordable housing. And with an 80/20
24 split, so that 20 percent would be
88
1 affordable; a subset of that would be more
2 deeply affordable. And for the benefit
3 period, which it's not clear what that is.
4 But, you know, were you involved in --
5 your office, in figuring that out?
6 DTF ACTING COMMISSIONER HILLER: No.
7 ASSEMBLYWOMAN SIMON: Okay. So you
8 don't have any analysis about whether a
9 different split like 25/75 might be more
10 appropriate or justifiable financially.
11 DTF ACTING COMMISSIONER HILLER: You
12 know, I really don't. I last worked on
13 housing policy, you know, 12 years ago,
14 13 years ago. I really don't have a view
15 there. Or any knowledge base there.
16 ASSEMBLYWOMAN SIMON: Thank you. I
17 appreciate it.
18 CHAIRWOMAN WEINSTEIN: We go back to
19 the Senate.
20 SENATOR GOUNARDES: Thank you,
21 Commissioner. I have just a couple of quick
22 follow-ups in my remaining three minutes.
23 I want to talk about the Direct File
24 pilot. I'm very excited about this. As you
89
1 know, I wrote you a letter a couple of months
2 ago about this. I think it's great. And I
3 think it's the future of tax collection and
4 administration.
5 You had mentioned that the pilot's
6 going to start with a limited number of
7 credits and exemptions. Can you kind of
8 expand on that a little bit? What are the
9 limited credits and exemptions that are going
10 to be part of that initial pilot?
11 DTF ACTING COMMISSIONER HILLER: So
12 the pilot in its first instance is being
13 driven by the IRS. And they've set some
14 limitations on the types of income deductions
15 and credits that will be administered at the
16 federal pilot.
17 I think you can't have more than $1500
18 of interest income. You can't -- you have to
19 be taking the standard deduction, you can't
20 be itemizing. They are allowing the earned
21 income tax credit and the child credit. In
22 New York we are following along on that,
23 because we're a parallel filing tool. So we
24 are following the IRS's limitations around
90
1 that.
2 So if you were taking an exotic
3 credit, you can't file. If you have itemized
4 deductions, you can't use this tool.
5 SENATOR GOUNARDES: Got it.
6 DTF ACTING COMMISSIONER HILLER: This
7 year.
8 SENATOR GOUNARDES: Gotcha.
9 DTF ACTING COMMISSIONER HILLER: I
10 mean, I expect that we'll be able to roll it
11 out next year.
12 One of the things that we are -- we
13 want to be careful about is to make sure that
14 taxpayers who are using these tools
15 understand whether the tool is right for
16 them. So it supports New York City income
17 tax, but the pilot does not support Yonkers
18 income tax. So this is not the right
19 solution for residents of Yonkers this year.
20 SENATOR GOUNARDES: Gotcha.
21 DTF ACTING COMMISSIONER HILLER: It
22 will be next year.
23 SENATOR GOUNARDES: Okay. Great.
24 That's really helpful.
91
1 And do you anticipate or can you
2 anticipate, you know, other jurisdictions
3 that have -- other countries, I should say,
4 that have kind of taken this step in direct
5 file, they kind of go one step further and
6 they actually mail or they send their
7 taxpayers or their residents pre-filled tax
8 returns, ultimately, just for certification
9 as part of the electronic system.
10 Do you see that as being kind of the
11 next step in our process here, assuming we
12 get through the pilot and we're able to, you
13 know, work out the kinks and do it
14 successfully?
15 DTF ACTING COMMISSIONER HILLER: I
16 think we have a lot of work to do before we
17 can get there, our own internal analysis.
18 You know, so one of the issues that
19 often drives an exception in our processing
20 work is the discrepancy between what a
21 taxpayer reports on their tax return as their
22 withholding and what the employer reports as
23 having withheld for that employee. And that
24 discrepancy triggers questions to the
92
1 taxpayer about that difference.
2 Our own internal work suggests that in
3 almost every case, it's a problem on the
4 employer side in the reporting, not a problem
5 on the employee side on their reporting. But
6 we don't know there's a discrepancy until
7 we're working an individual return. And so
8 individual taxpayers sort of bear the brunt
9 of working through the correction of those
10 errors. And we've been doing a lot of work
11 with employers to try to improve the payroll
12 reporting and the withholding reporting that
13 they are doing.
14 And if we can get to a place where we
15 feel that that's reliable, then we could use
16 that to generate pre-filled returns. But
17 right now we have significant doubts about
18 the reliability of the data we start with.
19 SENATOR GOUNARDES: Gotcha.
20 Well, thank you very much. Hopefully
21 we can see that to completion in the future.
22 Thank you.
23 DTF ACTING COMMISSIONER HILLER: Sure.
24 CHAIRWOMAN WEINSTEIN: So I think we
93
1 are finished with questions. A record,
2 maybe.
3 ASSEMBLYWOMAN SIMON: It's a record.
4 DTF ACTING COMMISSIONER HILLER: It is
5 a record. Thank you so much.
6 CHAIRWOMAN WEINSTEIN: Thank you,
7 Commissioner Hiller, for being here.
8 So next we will be having a panel
9 that -- to make presentations. Again, it
10 will be three minutes each, and then members
11 can ask questions.
12 So the panel is, if you could come
13 forward and take a chair -- we have to have
14 some more chairs, though. The first four --
15 we'll be playing musical -- the first four
16 get a chair. New York State Assessors
17 Association, Warren Wheeler; Fiscal Policy
18 Institute, Nathan Gusdorf; New York
19 Communities for Change, James Inniss; Invest
20 In Our New York, Carolyn Martinez-Class;
21 Citizen Action of New York, Rebecca Garrard;
22 and Strong Economy For All Coalition,
23 Michael Kink.
24 So just, again, a reminder for all of
94
1 you as you take your seats that your
2 testimony has been received, distributed to
3 all of the members here as well as members
4 from these committees who are not here, and
5 have been or will be, I think, already posted
6 by the Senate, and I believe the Assembly
7 also -- or shortly by the Assembly.
8 And after all of you have made your
9 presentations, there will be opportunity for
10 members to ask questions.
11 And I know the mics are a little
12 bit -- they're these new mics, so just -- if
13 whoever is speaking could just use the --
14 make sure that your mic is on.
15 And we start with Warren Wheeler.
16 MR. WHEELER: Good morning. Thank
17 you. In the accordance of time, I will get
18 right to it.
19 So everybody has the -- our written
20 testimony from the New York State Assessors
21 Association. My name is Warren Wheeler, and
22 I'm the executive director. So thank you
23 very much for this opportunity today.
24 First off, I'd like to show our
95
1 support for Part M of the budget clarifying
2 the telecommunications assessment ceiling.
3 One part that we would respectfully request
4 again is that there's some amendment in there
5 that allows for these companies to provide
6 inventory. It's very important that we get
7 this inventory. Right now we are not
8 afforded that inventory, and so it's very
9 difficult for us to maintain any kind of
10 assessment information when the inventory's
11 not provided.
12 It's very similar, if you would think
13 about it, as asking a property owner -- we're
14 standing there and the house is behind a
15 curtain, and we have to rely on the property
16 owner to tell us what's there.
17 All other property, we have the
18 accessibility of going and visiting and
19 obtaining the inventory. These types of
20 properties, we do not.
21 Also I would like to mention support
22 for A1292 and S04065. It's the -- what we
23 call the Condo Bill. For those of you who
24 have been here for a while, you'll understand
96
1 that we've been looking for a condo bill for
2 quite some time. Last year there was a
3 companion bill that was passed for
4 Greenburgh, and we would also like to throw
5 our support in for a condo bill that is at
6 local option.
7 So we feel that right now there's a
8 huge discrepancy between the way condominiums
9 and cooperatives are treated in relationship
10 to their single-family counterparts. And
11 while the bill originally may have been
12 created to -- you know, for affordable
13 housing or something along those lines, it's
14 definitely become what we refer to as a
15 loophole. And it's being used -- the homes
16 that are being built are not in the
17 affordable homes category.
18 And I think that's all I've got for
19 right now, so I don't want to take any more
20 of your time, so I would entertain any
21 questions.
22 CHAIRWOMAN WEINSTEIN: Great. Thank
23 you. So we move on to Fiscal Policy
24 Institute.
97
1 MR. GUSDORF: So thank you to the
2 committee. My name is Nathan Gusdorf. I'm
3 the executive director of the Fiscal Policy
4 Institute. We're a nonpartisan think tank
5 that studies state tax and budget policy.
6 We'd say the state's revenue needs at
7 this point are apparent, given the
8 Executive Budget's proposed cuts to
9 Foundation Aid, Medicaid, and the absence of
10 new initiatives in housing and climate
11 investment.
12 The question for this committee is to
13 what extent the state can raise additional
14 revenue through taxes to meet those needs.
15 But first I want to speak to some of the
16 issues that have come up today and that
17 always come up in terms of the viability of
18 raising revenue for the state's population
19 and fiscal base.
20 So the Fiscal Policy Institute
21 conducted a detailed study that you may have
22 seen; we released it in the fall. It was a
23 statistical overview of census data, federal
24 tax data and state tax data going back to
98
1 2015 to see whether there's any truth to
2 these claims of taxpayer outmigration.
3 We found that in normal years the top
4 1 percent of income earners typically move
5 out of the state at about one-fourth of the
6 rate of all other income groups. Further, we
7 found that when those high earners do move
8 out of the state, they typically move to
9 states like New Jersey and California that
10 have very comparable tax structures to our
11 own.
12 And finally, we looked statistically
13 at the two most recent tax increases, in 2017
14 and 2021, to see if that changed migration
15 behavior based on prior-year tax returns, and
16 we found that they generally did not.
17 The other common argument that we've
18 heard today is that there's that small share
19 of taxpayers who pay too much of the state's
20 income tax revenues. But as Senator Hoylman
21 noted, they earn about a third of all income
22 earned in the state, while paying about
23 44 percent of all income tax revenue for the
24 state. So that's proportionate, reflecting a
99
1 mild degree of progressivity in the state's
2 tax structure.
3 We also have a fairly large stock of
4 these high earners that's growing, suggesting
5 that we have ongoing fiscal stability for
6 that high end of the tax base.
7 If you look at the actual structure of
8 the state's taxes, there's considerable room
9 to raise income tax rates at the top in
10 particular, and to repair certain
11 peculiarities of our progressivity. Our top
12 tax rate is 10.9 percent. New Jersey's top
13 income tax rate is 10.8 percent; California's
14 is 13.3 percent. But New York imposes that
15 top rate on people who make over $25 million
16 a year. In New Jersey and California, they
17 impose their top rates on people who make
18 over a million dollars a year. So we're
19 fairly skewed in the structure of our top
20 brackets.
21 There are other sound tax-policy
22 options for addressing these revenue needs,
23 including looking at higher tax rates on
24 capital gains, possibly structured as a
100
1 higher net investment income tax rate, which
2 was done in Minnesota. And that's modeled on
3 a federal policy that is used to pay for the
4 Affordable Care Act.
5 There's also a lot that needs to be
6 done in corporate and business taxation, in
7 part due to the fact that most businesses are
8 not structured as corporations, and so they
9 don't pay the corporate tax. About
10 95 percent of businesses today are LLCs and
11 partnerships. It's worth considering doing a
12 business entity profits tax that would apply
13 across the whole field of businesses.
14 Thank you.
15 CHAIRWOMAN WEINSTEIN: New York
16 Communities for Change.
17 MR. INNISS: How you doing? My name
18 is James Inniss, and I come before you on
19 behalf of New York Communities for Change.
20 We are one of the largest
21 community-based organizations in the country,
22 with over 20,000 members in New York City and
23 Long Island. We bring neighbors together to
24 help build community power through direct
101
1 action, legislative advocacy and community
2 organizing. We organize in low-income
3 communities of color and for the 98 percent
4 of New Yorkers who haven't been mentioned in
5 this hearing today.
6 New York is staring down a
7 catastrophe -- orange skies, flooded streets,
8 deadly blizzards and unbreathable air are the
9 new reality. Climate migration is bringing
10 more families to New York who need the same
11 things that our communities need. And if we
12 don't cut climate-heating pollution by at
13 least 40 percent in the next six years,
14 things will get even worse. And on top of
15 that, New York is facing a profound housing
16 emergency.
17 It's hard to overstate the urgency.
18 2030 is five years away, and the climate
19 science is clear: Failure to reduce
20 climate-heating pollution by 40 percent will
21 guarantee catastrophe both locally and
22 globally.
23 In order to cut pollution and protect
24 our communities, we need to make it rain --
102
1 but not climate rain, money rain. That's
2 right, we need historic investments into our
3 communities, and the good news is we have
4 plenty of money in the state to make that
5 happen.
6 New York can rise to the occasion of
7 these unprecedented times that we're living
8 in and lead our nation in solutions at the
9 scale of the crisis that we are facing right
10 now. Or we can just allow them to spiral out
11 of control.
12 At the same time as all of this,
13 homeownership is increasingly out of reach
14 for most New Yorkers, with more families
15 being unable to afford their rent and many
16 more living in substandard, low-quality
17 housing.
18 As climate disasters displace millions
19 of climate refugees northward, an elevated
20 number of asylum seekers are making the
21 housing shortage in New York even more acute.
22 Within just New York City, 40 percent of
23 residents are facing displacement due to
24 rising sea levels.
103
1 It's a race to the bottom, and it does
2 not have to be this way. That's why New York
3 Communities for Change supports the Invest in
4 Our New York package which, if passed, will
5 raise tens of billions of dollars through the
6 combination of personal income tax increases
7 on the top 5 percent of earners, corporate
8 tax reforms targeting the most profitable
9 corporations -- which is fewer than the top
10 1 percent of them -- addressing loopholes
11 that allow millionaire and billionaires to
12 shield their wealth from tax liability.
13 The Senate and Assembly must listen to
14 the 73 percent of New Yorkers who support
15 raising taxes on the rich, and we must act
16 today. Together we can transform our state
17 into a place where everyone can live, breathe
18 clean air, and afford beautiful, safe,
19 fossil-free homes. Let's do it together.
20 And for everybody that celebrates,
21 have a happy Love Day.
22 CHAIRWOMAN WEINSTEIN: Thank you.
23 So now, Invest in Our New York.
24 MS. MARTINEZ-CLASS: Good morning. My
104
1 name is Carolyn Martinez-Class, and I am the
2 campaign manager for the Invest in Our
3 New York Campaign. The Invest in Our
4 New York Campaign is an unprecedented
5 campaign for a more just economy, fighting
6 through the state budget process.
7 We have a two-prong approach. We are
8 arguing for the need for critical investments
9 in housing, infrastructure, healthcare and
10 more, while advocating for those investments
11 to be paid for through increased taxes on
12 New York's millionaires, billionaires, and
13 wealthiest corporations.
14 You all have my testimony, so I'm not
15 going to -- I'm not going to reiterate what's
16 on there. I'm going to respond directly,
17 though, to some of the things that have been
18 raised.
19 So, one, proposals that are part of
20 the Invest in Our New York agenda and the
21 broader concept of raising taxes have been
22 described as crazy through the course of this
23 conversation. And to that, I'm going to say
24 that those proposals have the support of
105
1 two-thirds of New Yorkers regardless of
2 political affiliation, whether rural,
3 suburban, or in major urban areas in our
4 state. And so that is a majority support for
5 those proposals.
6 The budget today has been described as
7 responsible. I don't know in what universe a
8 budget that cuts education, healthcare, and
9 fails to fund and meet the moment we're in in
10 terms of the housing crisis can be deemed
11 responsible. And we know that fundamentally
12 our budgets are documents that are
13 reflections of our priorities as a state.
14 This is a budget that will further inequity.
15 New York is the most unequal place in
16 the country. Affordability has -- like
17 New York is the most unaffordable place in
18 the country. Wages have not kept apace,
19 despite the increase in the last year. And
20 we know New Yorkers are in need. And so I
21 just want to emphasize how critical it is to
22 make deep and lasting serious transformative
23 investments in our social safety net for
24 working-class people.
106
1 And we've talked a lot about
2 outmigration. The thing that hasn't been
3 raised is that the Comptroller, think tanks,
4 everyone's aligned that the people likeliest
5 to leave are working-class people. People --
6 in the Comptroller's report in December 2023,
7 he named that people who are likeliest to
8 leave the state were people earning less than
9 $500,000 a year. Those people have not been
10 impacted by tax increases in terms of the
11 proposals we've advocated and pushed for.
12 And so it really speaks to the need to
13 make investments in affordability and the
14 urgency surrounding that right now. And we
15 agree with what's been named around the need
16 for more progressive -- more progressivity in
17 the way our income tax is structured. And so
18 to that we'd say there's a Meeks/Jackson bill
19 that we hope you will take under
20 consideration for one-house budget proposals
21 and in the final budget.
22 And we would advocate for diversifying
23 our sources of revenue, including by taxing
24 wealth through proposals to tax capital
107
1 gains, inheritances, as well as the
2 billionaire's tax carried by Senator Ramos.
3 Thank you.
4 CHAIRWOMAN WEINSTEIN: Thank you.
5 And now Citizen Action of New York.
6 MS. GARRARD: We're on.
7 Thank you for the opportunity to
8 testify. I will for the sake of brevity,
9 because you also have the written testimony,
10 just say "Plus one" instead of going into
11 detail to the information that has been
12 shared about both the popularity of
13 progressive taxation and the impact of
14 New Yorkers and who's leaving and who's not
15 leaving, right, who's suffering and who's
16 benefiting.
17 So I will just plus-one that and
18 really spend my time talking about why the
19 sum of money that we propose is vitally
20 necessary.
21 Budgets are moral documents, and they
22 reflect the choices, right, of the Governor
23 and the Legislature in terms of who they're
24 prioritizing. And so this truly is a
108
1 decision: Are we prioritizing the wealthiest
2 New Yorkers, who will be fine if they pay a
3 little more, or are we prioritizing
4 struggling low- and moderate-income families
5 who are already barely surviving and
6 certainly cannot afford to make any more cuts
7 or lose any more resources?
8 And so certainly the cuts that have
9 been proposed to Medicaid, to Foundation Aid
10 are wholly unacceptable. And there's needs
11 and gaps to be filled on top of that, right?
12 So I'm going to mention a few of those.
13 When we think about healthcare,
14 healthcare remains unaffordable for many
15 New Yorkers. And in fact over
16 740,000 New Yorkers have a medical debt in
17 collections. That is a moral failure of this
18 state. Healthcare should be considered by
19 everyone a human right. And so that has to
20 be addressed.
21 We support the increase in the
22 hospital financial assistance and moving that
23 threshold for eligibility up from 300 percent
24 of the federal poverty limit to 600 percent.
109
1 We support the Governor's solution -- idea
2 for cost-sharing on insulin. And we
3 certainly vehemently push back on any cuts to
4 Medicaid.
5 Through the Invest in Our New York
6 package, that could be accomplished and we
7 could certainly make a dent in this
8 ever-escalating and unsustainable housing
9 crisis that we're in.
10 So we know that working-class families
11 are being driven out of the state due to
12 affordability. To that end, we must have the
13 Housing Access Voucher Program. We must have
14 legislation to create a Social Housing
15 Development Authority to have long-term fixes
16 to this crisis. And of course none of these
17 solutions will be tenable or effective
18 without good-case tenant protections.
19 In terms of climate, I will also just
20 plus-one. We are in no way planning for the
21 funding to meet the mandates of CLCPA. We
22 support the Climate Change Superfund Act, and
23 we support using IONY funding to meet those
24 mandates, which we are not on schedule to
110
1 meet.
2 In terms of child -- you can read the
3 testimony. There's multiple needs. But
4 thank you for the time.
5 CHAIRWOMAN WEINSTEIN: Thank you.
6 And to close out this panel, Strong
7 Economy for All Coalition, Michael Kink.
8 MR. KINK: There we go. Thank you.
9 Michael Kink, executive director of
10 the Strong Economy for All Coalition. We're
11 a coalition of labor unions and community
12 groups working together for economic, social
13 and racial justice.
14 We support the five-bill package that
15 the Invest in Our New York Campaign has put
16 together to tax high incomes, the most
17 profitable corporations and the most extreme
18 wealth.
19 The tax increases that Invest in Our
20 New York put forward and that the Legislature
21 passed in 2021 have been successful.
22 According to the Comptroller, they've raised
23 $10 billion more than predicted, and they've
24 added to that cash stockpile. The state is
111
1 not only sitting on $20 billion in reserve
2 funds, there's another $10 billion in unspent
3 money in the checking account.
4 There's essentially a $30 billion
5 reserve right now, in a year when we're
6 facing an affordability crisis.
7 The facts are the facts. FPI has put
8 it out: The people that are moving are
9 low-income and working-class New Yorkers.
10 The front page headline of the New York Times
11 said "New York's millionaire class is
12 growing. Other people are leaving."
13 Those kinds of headlines and those
14 kinds of studies are the types of headlines
15 and stories that should inform the debate
16 here at the Capitol. You cannot move to
17 avoid the corporate tax bill that we've
18 proposed in Invest in Our New York.
19 ExxonMobil is already based in Irving, Texas.
20 Tyson Chicken is already based in Arkansas.
21 They sell hundreds of millions of dollars of
22 products into New York, and they pay New York
23 taxes on those profits. That's right, and
24 that's appropriate.
112
1 That's why public polling, as Carolyn
2 mentioned, shows that vast majorities of
3 New Yorkers, including majorities of
4 conservatives and Republicans, say that
5 New York should increase taxes on the
6 highest-earning individuals, the most
7 profitable corporations, and the wealthiest
8 households to fund public programs and
9 services.
10 I want to take one second to talk
11 about capital gains tax, because Blake
12 Washington and Mark Massaroni, in their
13 technical briefing with reporters after the
14 Governor's budget address, noted that the
15 thing that took us from a $5.5 billion
16 deficit to a $2.2 billion surplus was a burst
17 of capital gains.
18 We taxed those capital gains at our
19 regular income tax rate. Those individuals
20 are dramatically undertaxed at the federal
21 level. You pay higher taxes on your paycheck
22 than you do when you get a check from your
23 huge investments on Wall Street.
24 So a capital gains tax, like
113
1 Washington State instituted two years ago,
2 like Minnesota instituted this year, would
3 benefit New York tremendously. Billions of
4 dollars to fund housing, to fund schools, to
5 fund healthcare -- and it would only hit
6 1 percent of taxpayers who are already
7 undertaxed at the federal level.
8 A capital gains tax is timely. It's
9 one of the five bills, and we stand with the
10 Invest in Our New York Campaign to urge you
11 to consider all five bills in this year's
12 budget. Thank you.
13 CHAIRWOMAN WEINSTEIN: Thank you.
14 We go to Assemblyman Ra.
15 ASSEMBLYMAN RA: Thank you.
16 Just wanted to point out -- and I mean
17 if you disagree, please tell me. But
18 Mr. Gusdorf, you talked about that it was
19 said earlier that, you know, the higher
20 earners pay too high a rate. I mean,
21 maybe -- we would probably agree to disagree
22 about that. But I think what Acting
23 Commissioner Hiller was saying, which is
24 something that I think is not something that
114
1 can be argued, is that, you know, they make
2 up a very large portion of our tax base. And
3 when there's fluctuations, that can have a
4 very big impact on our tax receipts.
5 Would -- do you disagree with that?
6 MR. GUSDORF: I think that's generally
7 right.
8 ASSEMBLYMAN RA: Yeah. So just that
9 point of clarification, that we can debate
10 what the appropriate share is, but it does
11 have an impact when we have -- see ebbs and
12 flows in the economy because we are so
13 heavily reliant on that piece of the tax
14 base.
15 But I did want to ask about something
16 which I think many of us might be able to
17 agree upon, which is if you have any comments
18 on the recent report that came out about all
19 the tax incentive programs and the, you know,
20 kind of a lack of a bang for a buck that
21 we're getting.
22 Because when we talk about revenue,
23 certainly there are any number of proposals
24 out there for new sources of revenue, but
115
1 there is also a lot of revenue we forego as a
2 state trying to, you know, do so in the name
3 of economic development, and most of the
4 programs are not doing too well in terms of
5 that.
6 MR. GUSDORF: Yeah, and FPI would
7 agree with that.
8 I'd say there are two pretty widely
9 agreed-upon fundamental principles of sound
10 tax policy. One is progressivity, to make
11 the tax system fair, and the other is having
12 a broad base. The more that you selectively
13 grant exemptions or cut people out of the tax
14 system, the less revenue you get and the more
15 burden is shifted onto all other taxpayers.
16 And so all of those credits and
17 exemptions certainly really undermine the
18 broad-based prong of New York's tax code.
19 And, you know, they should be at a minimum
20 very heavily scrutinized.
21 ASSEMBLYMAN RA: And if anybody else
22 has any thoughts, there's 35 seconds left.
23 MS. MARTINEZ-CLASS: The Invest in Our
24 New York Campaign supports shifting those
116
1 economic development funds into the public
2 programs we've named.
3 MR. KINK: And I'll note that the
4 return on investment data in that report
5 shows that there's not a single, quote
6 unquote, economic development program in
7 New York that provides a higher return on
8 investment than the investments in early
9 childhood education, public health programs,
10 or housing for New Yorkers who are homeless.
11 All of those programs provide a way
12 bigger bang for the buck than any of the
13 economic development programs we have now.
14 ASSEMBLYMAN RA: Thank you.
15 CHAIRWOMAN WEINSTEIN: We next go to
16 Assemblyman Mamdani.
17 ASSEMBLYMAN MAMDANI: Thank you very
18 much for all of your testimonies.
19 Mr. Gusdorf, I wanted to just follow
20 up with you on a set of questions.
21 You know, the Governor in her State of
22 the State said that, quote, People aren't
23 moving for warmer weather or for lower taxes,
24 they're moving next door. I just wanted to
117
1 know what your thoughts were on that and if
2 you could elaborate on what do you think the
3 best way is to deal with the affordability
4 crisis that she was alluding to.
5 MR. GUSDORF: Thank you,
6 Assemblymember. That -- we were very pleased
7 to see the Governor make that statement in
8 her State of the State, as it tracked very
9 closely with the findings of our report that
10 had been published just a little bit earlier.
11 What we think that shows -- and it
12 follows on previous research that FPI has
13 done as well -- is that the biggest
14 differences between New York and neighboring
15 states is really in the cost of living, and
16 in particular in the cost of housing and the
17 cost of rent -- really not the tax structure.
18 So that confirms what should be
19 intuitive to many of us, which is that just
20 the challenges of affordability, and in
21 particular the high cost of housing and rent,
22 is a much stronger explanation for migration
23 behavior of low- and middle-income earners in
24 particular.
118
1 What we think should be done at the
2 state level, among other things, is really
3 significant public investment in housing
4 construction. It's important to create
5 affordable housing for people at the low end
6 of the income spectrum, but it's also
7 important to increase the production of
8 housing for middle-income renters, both so
9 that people have somewhere to go, but really
10 to reduce pressure in the housing market.
11 And we think it's unlikely that you'll
12 see those kinds of protections against market
13 risks for middle-income renters without a
14 focused plan of state investment in something
15 like a social housing authority that has been
16 proposed in the Assembly.
17 ASSEMBLYMAN MAMDANI: Thank you for
18 that.
19 And just a follow-up question from
20 some of what Commissioner Hiller's testimony
21 focused on, as well as the questions that
22 they received. I just wanted to hear your
23 thoughts.
24 You know, after the personal income
119
1 tax increase that we enacted through the
2 budget in 2021, the state's own tax website
3 showed the millionaire population grew and
4 the rate of millionaire outmigration shrank.
5 What does that data tell us? What
6 does it tell you, what does it tell the
7 Fiscal Policy Institute about the
8 correlation -- or lack thereof -- between
9 taxes and the millionaire population?
10 MR. GUSDORF: Yeah, there are a few
11 things we've seen.
12 One is that when we look at the data
13 that we can see from other sources such as
14 the census, as well as the Tax Department's
15 data, the millionaire outmigration trend
16 decreases from 2020 to 2021. So obviously
17 the pandemic itself is a confounding factor.
18 But 2021 is when the state last raised
19 income taxes. So it doesn't look to us,
20 based on the data that we can see, that that
21 caused more people to move away. Fewer high
22 earners moved away from 2020 to 2021.
23 I think I missed something.
24 ASSEMBLYMAN MAMDANI: Thank you very
120
1 much.
2 CHAIRWOMAN WEINSTEIN: So thank you
3 all for being here. There are no further
4 questions.
5 As I mentioned earlier, all of the
6 testimony is available for the public as well
7 as colleagues to see on the Assembly and
8 Senate's websites.
9 Just for anybody listening, as of the
10 close of today, if anybody who hasn't yet
11 submitted testimony, you can still submit
12 testimony that will be made public.
13 So this concludes the Tax hearing for
14 this year on the Governor's budget. We will
15 reconvene at -- promptly at 12 noon for the
16 start of the Housing hearing. Thank you.
17 (Whereupon, the budget hearing
18 concluded at 11:22 a.m.)
19
20
21
22
23
24