The Citizens Budget Commission agrees with the Partnership on the sharply improved financial picture and the risks of a tax hike.

“The fiscal reality is that we are in good enough shape in the short and medium term, we have other options and we do not need to raise taxes,” said CBC President Andrew Rein. “And raising taxes can hurt our economy.”

The CBC recently said that the state’s budget could be balanced without a tax increase by borrowing for capital projects that are currently paid from the operating budget and reducing what it has long argued is wasteful economic development spending.

It said the amounts saved — about $2 billion over each of the next three fiscal years and another $1 billion in 2025 — equal the total raised from both an income tax increase and delaying middle class tax cuts scheduled for next fiscal year.

The state needs to use the federal aid to restructure its budget because the economic recovery here is expected to be much weaker than in the rest of the country, Rein said.

Critics of tax hikes on the wealthy point to anecdotes and years of concern about making the state unfriendly to high earners, some of whom may already be living in second homes outside the state amid the pandemic.

“There is evidence that people do leave because of taxes,” said Andrew Rein, president of the fiscally conservative think tank, the Citizens Budget Commission, though he cautioned that research on the topic is somewhat thin.

“There aren’t that many robust studies and they don’t correlate to where we are. I do think the risk is real.”

As the City Council attempted to reverse the trajectory of the rising police budget, they ended up making cuts around the edges. The mayor advertised a $1 billion cut, a number that was also arrived at without careful study, but in the end, they were only able to reduce the budget from $5.31 billion to $4.89 billion, a reduction of just $345 million, according to data released by the Citizens Budget Commission. To get that reduction, the adopted budget shifted responsibilities between agencies. It also projected an unrealistic decrease in overtime spending without providing any plan to achieve this. Without greater oversight, and without a strategic goal, it is unlikely these reductions will be achieved.

The income-tax hike alone would put New York’s top combined state and local tax rate at 14.7 percent, the nation’s highest. As the nonpartisan Citizens Budget Commission notes, that “heightens the risk that these residents will leave the state, taking their tax payments and possibly business interests with them.”

Empire Center fiscal expert E.J. McMahon has echoed that fear, noting that “the highest 1 percent of taxpayers” already account for 40 percent of the state’s personal-income tax. If efforts to bleed them for more drive them away, the state could see a net loss on its tax hikes.

Cash-flight risks are higher now, the CBC points out: “The past 11 months of telecommuting and remote business administration” have proven “the viability of being outside of New York.”

"This is so hard to get done, so it needs momentum," Andrew Rein, president of the Citizens Budget Commission, said in a phone interview Wednesday. "One of the challenges is obviously that administrations only last so long. It needs momentum, whether the mayor can get it done in the current year, which is certainly a challenge, or at least build that support for the next mayor."

For Rein, property tax reform is paramount to encourage rental housing development and broader economic growth, which he says is right now impeded by opaque and uneven taxation.

"There is no question that this is a top Albany agenda if we are going to launch out of this recession into the next recovery," he said.

Cunningham cited a recent report by the nonpartisan Citizens Budget Commission, which estimated that projections by advocates of the tax were too high.

“Advocates claim the tax could yield up to $13 billion in annual revenue, based on data from past years. The record from fiscal year 2020, however, shows collecting the STT this past year would only have yielded $4 billion, just a third of advocates’ estimate,” the commission stated.

“In fact, the State would likely amass even less, since firms might avoid the tax by using new technology or relocating the trading portion of their businesses outside New York. While tax avoidance could yield disappointing revenue on the newly reinstated tax, relocation of securities industry jobs outside of New York would harm the State’s employment opportunities and tax collections.”

The group recommended not reviving the tax and using other ways to close the budget gap the state is facing, including reducing local aid and eliminating capital spending on some economic development projects.

The transfer tax was originally imposed in 1905, but was virtually eliminated in 1981. It taxes shares that are traded, based on the dollar value of the shares. Lawmakers recently introduced a bill to amend the tax law to tax transfers of stocks, bonds and derivatives, citing the budget deficit facing the state.

Cunningham cited a recent report from the nonpartisan Citizen Budget Commission, which found that projections by tax advocates were too high.

The stock transfer tax is not a new concept. It originally took effect in 1905 and was effectively eliminated in 1981 when the state instituted a 100 percent rebate on the tax. The Citizens Budget Commission recently found that if the transfer tax had been reinstated last year, it would have generated $4 billion, significantly less than advocates’ annual projections of $13 billion in potential tax revenues.

The idea of the transfer tax is also somewhat outdated. The levy only applies to trades that occur in New York state. With most stock trades happening online, it can be difficult to tell where a transaction occurred. Most of the NYSE’s servers are already located outside of the city in Mahwah, N.J.

Last fall, when New Jersey threatened to levy its own stock transfer tax, the stock exchange processed a small percentage of its trades on its servers in Chicago, just to demonstrate that it could do so. Two other exchange operators, Nasdaq and Cboe Global Markets (CBC), also said they would leave New Jersey if the state instituted the tax.

And the tax would not only affect traders and hedge funders. Both CBC and Cunningham pointed out that it would raise the cost of investing in index funds for retirement or a child’s college education.

Cunningham cited a recent report by the nonpartisan Citizens Budget Commission, which estimated that projections by advocates of the tax were too high.

“Advocates claim the tax could yield up to $13 billion in annual revenue, based on data from past years. The record from fiscal year 2020, however, shows collecting the STT this past year would only have yielded $4 billion, just a third of advocates’ estimate,” the commission stated.

“In fact, the State would likely amass even less, since firms might avoid the tax by using new technology or relocating the trading portion of their businesses outside New York. While tax avoidance could yield disappointing revenue on the newly reinstated tax, relocation of securities industry jobs outside of New York would harm the State’s employment opportunities and tax collections.”

The group recommended not reviving the tax and using other ways to close the budget gap the state is facing, including reducing local aid and eliminating capital spending on some economic development projects.

Proponents think reinstating New York’s stock-transfer tax will fill the state’s coffers and ease its budget challenges. But the nonpartisan Citizens Budget Commission said that if it had been collected this past fiscal year, the stock-transfer tax would have yielded only a third of the revenue its advocates estimate: “In fact, the State would likely amass even less, since firms might avoid the tax by using new technology or relocating the trading portion of their businesses outside New York.”

As reported by the NY Post, Mayor Bill de Blasio’s budget is counting on $1 billion in recurring savings from the Big Apple’s labor unions — but these concessions have not yet been agreed to. The Citizens Budget Commission (CBC) said that the city hasn’t even publicly presented a plan with which to reach this goal. “I look at this as a fake part of the budget. This $1 billion in labor savings is a fiction until they come up with a plan,” said Andrew Rein, head of the budget watchdog group. “Fictional savings in the budget is masking the depth of the problem.”

Mayor Bill de Blasio has listed the $1 billion in savings, which is not yet a reality, to keep the city’s explosive budget deficits in check, not just this year but for the next four years. For 2022, the labor savings keeps the $92.3 billion budget from dipping into the red, says the CBC. If the labor cuts don’t materialize, in 2023, City Hall’s deficit will expand to $5.3 billion, instead of the $4.3 billion currently projected. Without the $1 Billion gimmick, the budget for 2024 and 2025 similarly jump, and those budget gaps may surpass $5 billion, as per CBC’s analysis.

In 2019, Citizens Budget Commission estimated that New York is losing up to $63M in NYS taxes and $31M in NYC taxes from the Zones. However, these numbers are likely to go up, as Opportunity Zones’ investment deadline has been repeatedly pushed back by the Internal Revenue Service, supposedly due to the pandemic.