National News

Cuomo Charts Course for 2018, Eyeing Trump on the Horizon

Posted January 3, 2018 9:22 p.m. EST

ALBANY, N.Y. — With a re-election campaign and potentially treacherous political terrain ahead, Gov. Andrew Cuomo laid out his 2018 agenda Wednesday, painting a portrait of a state battling the effects of terrorism, sexual harassment and opioid addiction, and under siege from the Trump administration.

In his 90-minute State of the State speech, Cuomo said the state would challenge the new Republican-led federal tax plan in court — earning a standing ovation from the crowd — and asked the Legislature to restructure the state’s tax code by adding a statewide payroll tax and to counter the effects of the so-called carried interest loophole.

The governor’s office suggested that it was reviewing eliminating the state income tax, whose deductibility was capped by the new federal tax bill, likely in favor of a payroll tax, which is deductible — an idea also being floated in other states. Precise details on the plan were scant, and such a plan would face an uphill battle, with Republicans generally opposing new taxes and some conservative economists already voicing concerns Wednesday.

The proposal to constrain the carried interest loophole — which allows a private equity partner or hedge fund manager to enjoy a lower tax rate on an investment’s profits — would call for creating a compact with neighboring states that would impose a new tax on those taking advantage of the loophole.

Still, with New York facing billions of dollars in budget gaps, and swaths of suburban voters possibly looking at tax increases as a result of the new cap on income and property tax deductibility, the initial reaction in Albany suggested the idea had a puncher’s chance, including among some state Senate Republicans representing moderate districts.

And Cuomo, whose angry rhetoric leading up to the passage of the federal tax bill had bordered on the extreme, seemed to be banking that he could unite New Yorkers on both sides of the aisle to fight against Washington.

“You’re now robbing the blue states to pay for the red states,” the governor said of the federal tax plan, calling it crass, ugly and partisan. “It is an economic civil war.”

Cuomo’s eighth State of the State came amid one of the hardest economic outlooks of his time in office, including a $4 billion budget deficit. It also came at the fulcrum of a critical political moment for the governor, a Democrat expected to easily secure a third term in November whose name has been bandied about as a possible presidential contender in 2020.

On one hand, the governor seems eager to use such speeches to reach for the kind of lofty rhetoric that also made his father, former Gov. Mario Cuomo, a national figure. On Wednesday, in fact, he cited his father on several occasions, saying he was following the former governor’s lead as a “pragmatic progressive” who had led the state into a position of being “the nation’s vanguard for social progress.”

Cuomo cited accomplishments like raising the minimum wage, legalizing same-sex marriage and establishing a paid family leave program. And the agenda he laid out Wednesday was a sweeping catchall of blue-sky ideas, from encouraging self-driving cars and drones to building what would be New York City’s biggest state park on Jamaica Bay and extending a subway line to Red Hook in Brooklyn.

All of which earned it a fair measure of skepticism from conservative leaders.

“I don’t know how the heck anyone can conceive of paying for everything that was laid out,” said John J. Flanagan, a Long Island Republican and the Senate majority leader. “I always respect the ambition, but at some point, somebody’s got to pay for it.” Edward F. Cox, the state Republican Party chairman, was more dismissive. “Of course there are a lot of nice things in there that you have to applaud for,” he said, mentioning the park plan, “but the basic issues this coming election year are going to be corruption, which he’s got plenty of them.”

Indeed, Cuomo faces a daunting array of possible political pitfalls in 2018, including a series of corruption trials of close former aides, allies and associates, and a restive Democratic base hoping for stronger progressive stands from a politician known as a shrewd, if solipsistic, political dealmaker. In particular, the twisted calculus of the state Senate — where New York Republicans hold their sole foothold of power in the state thanks to a partnership with nine rogue Democrats — looks to present problems for the governor if he fails to broker or campaign hard for a Democratic majority, something some left-wing groups question his willingness to do.

On Wednesday, however, progressive groups were embracing the idea of a payroll tax. “It is smart and necessary for states to respond to the federal attack,” said Michael Kink, executive director of the Strong Economy For All Coalition, a group of unions and community organizations that advocates for tax code reform and a higher minimum wage.

Kink also praised the idea of eliminating the carried interest loophole, which he said hedge funds or private equity funds had long used to avoid paying the highest amount of income tax by classifying the fees they charged for managing investments as long-term capital gains.

“It’s an entirely fictional legal accounting thing,” Kink said. “It basically allows them to pay a lower rate than teachers and truck drivers.”

Mayor Bill de Blasio of New York City, recently re-elected, made the trip to Albany for the speech, receiving a warm applause from the crowd Wednesday, despite often finding his agenda thwarted in the Capitol. Cuomo and de Blasio have feuded regularly, and Cuomo several times obliquely asserted his readiness to insert himself into the city’s affairs — including homelessness, saying he had directed the Metropolitan Transportation Authority and the Port Authority of New York and New Jersey to increase outreach to homeless men and women.

And the city’s decaying subways — whose shoddy performance politically damaged the governor, who controls the MTA — was also the source of a request for more financial backing, with Cuomo taking a veiled swipe at “cheap political slogans” that had failed to address the problems of the aging system.

But on the issue of taxes, the mayor seemed to set aside any bad blood with the governor, saying he was heartened by the proposal on the payroll tax and calling it a “creative solution.”

“Look, we want to protect New Yorkers from an unfair tax bill,” de Blasio said. “If there had been any sense in Washington of fairness and decency towards people all over the country, they never would’ve taken away state and local deductibility.”

Perhaps aware of the help he would need in perilous financial times, Cuomo also repeatedly praised Albany’s often-criticized lawmakers, saying he would need them to make hard financial choices, something he has prided himself on in the past, again being pragmatic about the state’s needs.

“We should feel confident in our ability to govern,” he said, “and to do what many people believe can’t be done.”

The election of President Donald Trump has given Cuomo the opportunity to present himself as a steward of progressive policies, and he has spent the better part of the past year attacking Washington — if not always the president by name — to burnish his own political brand.

And while Cuomo mentioned Trump only once, chiding him for fomenting a divisive political culture, he characterized the cumulative effect of his administration as a “federal assault” that he likened to President Gerald Ford’s 1975 decision to deny bankruptcy aid to the city (resulting in the famed “FORD TO CITY: DROP DEAD” headline in the Daily News).

“This federal government is the most hostile and aggressive toward New York in history,” the governor said. “It has shot an arrow aimed at New York’s economic heart.”