Cuomo Speaks on Pandemic, Budget Gap; Proposes Legal Cannabis for Revenue Boost

Chris Gaetano
Published Date:
Jan 11, 2021
New York Gov. Andrew Cuomo, in his annual State of the State Address on Monday, focused on the pandemic and its economic repercussions, saying that New York is "suffering." New Yorkers "are tired of being abused by Washington," he said, blaming the federal government for spending the last four years "savaging" the Empire State. Cuomo laid the blame for the pandemic squarely at the feet of the federal government, saying that its "gross negligence" is responsible for both a slow response to the virus as well as what he called a failure to recognize it as a national-scale crisis.

"New York's damage from COVID is clearly, legally, and ethically Washington's liability," he said.

Cuomo said that this failure of leadership at the federal level means that New York is owed federal aid as a simple matter of "economic justice," and also as a matter of "economic prudence," owing to the state's importance to the nation's general economy. He specifically cited as examples of injustice the $10,000 cap on state  and local tax (SALT) deductions included in the Tax Cuts and Jobs Act, and reduced Medicare reimbursement rates.

Cuomo added that, absent federal aid, Albany would need to take harsh measures to address a $15 billion budget gap that could severely harm the state's ability to respond to the pandemic's impact.

"If we raise taxes on the highest income tax rate in the nation, on all income over $1 million, ... we'd only raise $1.5 billion," he said. "If we postponed our important tax cut for the struggling middle class, we'd save $500 million. If we froze labor contracts for our public employees, ... we'd save $1 billion. If we cut education funding for our children 20 percent, we'd save $5.2 billion. Even after all that pain, we would need to cut billions to health care in the middle of a pandemic, and borrow billions at the cost of future generations. It would be devastating to all New Yorkers."

Beyond calls for federal aid, the governor also made a number of proposals that his office intends to pursue as the year goes on. One of them is the legalization of adult use of recreational cannabis.

"We will legalize adult use recreational cannabis, joining 15 other states who have done so, which would raise revenue and end the overcriminalization of this product which has led to so many communities of color being overpoliced and overincarcerated," he said.

A later news release going over the proposal in more detail said that the program would be overseen by a new Office of Cannabis Management, which would also review the currently legal medical use. As a way to address the manner in which cannabis criminalization affected many marginalized groups, the program will also "offer[] licensing opportunities and assistance to entrepreneurs in communities of color who have been disproportionately impacted by the war on drugs." Once fully implemented, legalization is expected to generate more than $300 million in tax revenue. The release did not have any further detail than that, but there will likely be more specifics as the year goes on.

The governor also plans to propose a moratorium on evictions for commercial tenants until May, as well as a ban on late payments or fees for missed rent payments during the pandemic. This measure will also allow renters facing financial hardship due to COVID-19 to use their security deposit as payment and repay their security deposit over time.

Cuomo further proposed a number of health initiatives involving telehealth, nurse education, and modernizing the Office of Professional Medical Conduct. In addition, he called upon the spirit of Franklin Delano Roosevelt and proposed two major infrastructure programs, one concentrating on transportation and the other on green jobs.

Photo by Metropolitan Transportation Authority / Patrick Cashin

Practitioners interested in learning more about COVID-19 and related tax issues should consider attending the Foundation for Accounting Education's COVID-19 Emergency Relief Act Impact on 2020 Tax Returns and the 2021 Tax Season Webcast on Jan. 13.

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