Senate Proposes $4 Billion December Revenue Package, but Assembly Won’t Go That High, Sources Say

In negotiations between the leadership of New York’s two legislative chambers, the Senate has proposed reconvening the legislature this month to pass taxes and other revenue raisers that would bring in as much as $4 billion in new revenue—but Assembly Speaker Carl Heastie is pushing for a more conservative package that would raise closer to $2 billion, sources familiar with negotiations told New York Focus.

Both chambers have proposed reconvening the legislature to pass a personal income tax increase on millionaires. But the Senate has proposed a host of smaller revenue raisers in addition, sources said, while the Assembly has insisted that a December revenue package only include the income tax increase.

And in another major area of contention, the Senate’s proposal would retroactively apply the personal income tax hike to 2020 while the Assembly’s proposal would only apply to 2021. Heastie has argued that taxing 2020 income would be unconstitutional.

It’s far from inevitable that the chambers will broker a deal before the end of the year.

"The Assembly is unwilling to consider retroactivity or anything other than a PIT increase, right now, which limits the ability to raise the kind of revenue that is necessary," said a source who asked not to be named. “It might not be possible to get consensus on a big enough revenue package to justify doing something now as opposed to marshaling our efforts for early next year.”

“The Senate is in a better place but not the place advocates want to be, and the Assembly is in a horrible place. Carl is just in a bad place. He’s in a bad place on everything. And I’ve heard he’s talking to Cuomo,” said Cea Weaver, campaign coordinator of the Housing Justice for All coalition.

Progressive advocates and legislators have pushed for $10 billion in new revenue in an emergency December session, and ramped up the effort publicly in a joint social media campaign yesterday. Weaver said she doesn’t know whether advocates would support a $4 billion package, even if the Assembly agreed to it.

“Two, we’d be mad, and we’re asking for ten. Four, five and six are confusing—I’m not sure what we would do. The truth is, ten is already a compromise when the State is in a $15 billion hole,” Weaver said.

As the Wall Street Journal and Spectrum News have reported, the Senate has proposed raising the personal income tax on New Yorkers making more than $2 million, while the Assembly has proposed raising the tax on New Yorkers making more than $1 million.

But the income threshold is likely not what’s holding up a deal, sources said, as the Senate would lower their proposed threshold if the total revenue package were substantial enough.

One source said they had heard that the additional revenue items in the Senate’s proposal might be taxing mezzanine debt, raising corporate taxes, and speeding up licenses for casinos. Another source said that a pièd-a-terre tax and the authorization of mobile sports betting might be part of the mix. Mike Murphy, the Senate Democratic conference’s communications director, declined to comment on which revenue-raisers were in play.

Heastie’s proposed personal income tax increase—the single revenue-raiser he supports passing in December—would not apply to 2020 income, sources said. Raven Brown, a spokesperson for Heastie, did not respond to multiple requests for comment.

Heastie has said publicly that he believes the state constitution bars retroactive tax increases, explaining why he has advocated reconvening before the end of the year in order to raise taxes on next year’s income. He has offered the same rationale for opposing the Senate’s proposal to raise taxes on 2020 income, sources said.

Asked about Heastie’s argument, four tax experts told New York Focus that it doesn’t hold water. Some noted that the state had retroactively raised taxes as recently as 2009.

James Wetzler, the state tax commissioner during Mario Cuomo’s administration, told New York Focus that he saw no legal obstacles to taxing 2020 income, while noting that there were “practical questions” of tax flight and cash flow for people who have already estimated their tax burdens.

“In terms of what’s legally permissible, I think you can change the laws as long as they haven’t filed a tax return,” Wetzler said. “The state has enacted retroactive income tax increases. I don’t know that anyone’s ever raised a question about that. I’m not exactly sure why the speaker’s raising that issue now.”

“The cases that I’ve seen where taxpayers have successfully challenged retroactive tax legislation involve very different circumstances than what seems to be under discussion now, but of course political actors can/will exploit that ambiguity to advance their own preferences for the timing of legislation,” wrote Kirk Stark, a UCLA tax law professor, in an email.

“One year or less [of retroactivity] has always been ruled to be fine,” said Indiana University tax scholar David Gamage, adding that legal challenges could not be mounted until after the state collects taxes. “You can’t challenge the constitutionality of a tax before paying tax. Congress and state legislatures don’t want frivolous challenges to prevent tax collection.”

As rumors flew and tensions escalated, rank-and-file legislators in both chambers expressed frustration at being left out of the loop. “The hardest part of the whole conversation is it’s all happening behind closed doors. So there's all this he said, she said stuff, and everything’s swirling because no one really knows what’s happening,” one Assemblymember said.

“So the Senate people may say this is what the Senate is doing, but we have no idea what the Senate is doing. The Assembly people may say this is what the Assembly’s doing, but we really just don’t know, because it’s all happening behind closed doors. Someone could just say it—but it doesn’t mean it’s true, on the Assembly or the Senate side, because no one’s having a public conversation,” they added.

Another Assemblymember argued that if Heastie is not agreeing to as bold a revenue package as the Senate, it might in part be because he is aware of the legislature’s weaker position relative to the governor “based on the limitations that we have for this year,” before the Senate supermajority is seated.

“I wouldn’t take the bait of, ‘it’s a problem between the Senate and the Assembly’—it’s really a problem between us and the executive,” they added, noting Heastie’s public tussle with the governor over raising taxes in December yesterday.

Yesterday would have been the last day the legislature could introduce legislation in time for it to avoid the possibility of a pocket veto by Governor Cuomo. As the deadline approached yesterday, legislators had differing views on its importance. “Today’s the last day where we could have any kind of leverage against the governor for this year,” one Assemblymember said. Others said there wasn’t much practical difference between a pocket veto and normal veto.

A number of observers said they were genuinely confused by the positions Heastie has taken.

“Whether this is a negotiating difference or an actual difference—that’s where I have an open question. It would be hard for me, right now, to say Andrea Stewart-Cousins is good, and Carl Heastie is bad. It seems for the moment maybe, but things are super fluid,” one progressive advocate said.

One possibility, they said, is that Heastie could be signaling to special interests that he’s ready to be more of an ally than he has in the past.

“For many years, the Assembly was the house that led most forcefully and publicly on taxing the rich and improving public goods. Now the Senate is fully Democratic—maybe now the shoe’s on the other foot,” they said.

“The folks that might get taxed have employed super skilled lobbyists, all of whom are very politically connected and make large contributions. There's a lot of politics and money swirling around. Demonstrating that you're open to moderating your position from where you've been before signals something to that crowd.”

A more benign possibility, they said, is that Heastie could be making a play to bring the governor into revenue discussions.

“Part of the dance here is managing the expectations and favor of the governor,” the advocate said. “Who knows, Heastie is a pretty good negotiator at times, maybe he’s building his bona fides with the governor, so he can get the governor in deeper and then turn him around. All kinds of things happen in these situations.”