cuomo-150x150-8434269As part of his ongoing push for a statewide $15 minimum wage, Governor Andrew Cuomo repeatedly has denounced what he calls “the mother of all corporate loopholes.” In Buffalo this week, he amped up his rhetoric, reportedly charging that “business is stealing from taxpayers of this state.”

Cuomo wasn’t referring to any of the notable business tax giveaways he has personally promoted, such as the $420 million a year the state doles out to wealthy film and TV producers, or the state’s $750 million speculative investment in billionaire Elon Musk’s solar panel factory in Buffalo, or the 100 percent tax exemptions that will flow to the handpicked corporate occupants of START-UP NY zones.

Rather, the governor’s ire has been directed at state and federal programs that provide health insurance coverage and wage subsidies for low-income workers. The largest direct cash benefit in a typical low-income worker’s public assistance package is the Earned Income Tax Credit (EITC)—pioneered in New York State by the late former Governor Mario Cuomo, in whose memory the current governor is campaigning to establish a statewide $15 an hour minimum wage.

With strong bipartisan support, the federal EITC was first enacted 40 years ago to offset the burden of payroll taxes and provide an incentive to work for low- and moderate-income families. The EITC is refundable–which means that when the tax credit exceeds the amount of taxes owed, the difference becomes a tax refund. As a result, it effectively creates a form of negative income tax. (For more on how the EITC is designed to make work pay, see this 2012 Empire Center report.)

Andrew Cuomo has not attacked the EITC by name, but it’s part of what he apparently means when he claims that “McDonald’s workers qualify for welfare and for food stamps, and the taxpayers give McDonald’s workers $6,800 in tax subsidies.”

The $6,800 figure can be traced to this 2013 report by labor researchers at the University of California, Berkeley, and University of Illinois at Urbana-Champaign. In a 50-state rundown of what it termed the “public cost of low-wage jobs in the fast-food industry,” the report estimated that the families of 104,000 fast food workers in New York receive a total of $708 million in public social services benefits.

That number included $113 million in EITC benefits and $60 million in food stamps (now known as Supplemental Nutritional Assistance, or SNAP). Nearly all of the remainder—an estimated $521 million, or nearly three quarters of the total—consisted of the value of health coverage provided by Medicaid.

The logical implication of Cuomo’s claim is that programs such as the EITC and food stamps for working people should be sharply curtailed if not repealed. His rhetoric also implies that New York should roll back benefits made available to working families under what used to be known as Family Health Plus and Child Health Plus, now subsumed in and subsidized by the Medicaid expansion under President Obama’s federal Affordable Care Act (ACA).

After all, if these programs merely represent “loopholes” exploited by businesses “stealing” from taxpayers, how can they be defended? If government benefits for working families should actually be construed as employer subsidies (a view economist Douglas Holtz-Eakin describes as “real, oft-repeated and … 1,000 percent wrong”), should we feel compelled to do away with the programs?

Cuomo is implying as much. Including that $708 million figure for fast-food workers, he estimated the value of all social service benefits for low-income workers at $2 billion and declared: “I say raise the minimum wage and let’s do a $2 billion tax cut and give that money back to the taxpayers.” Which would require, in addition to repeal of the EITC, a rewriting of the federal welfare law, a rollback of food stamp eligibility guidelines and a reduction in Medicaid benefits, throwing low-income workers into private health insurance exchanges. Which, of course, the governor actually has no intention of advocating. Or does he?

The father of the earned income tax credit

Governor Mario Cuomo’s 1994-95 Executive Budget Message included this passage.:

“Having monitored its success on a federal level, I will propose a state earned income tax credit to enhance work incentives for poor families, providing them with financial opportunities without the imposition of onerous administrative procedures.”

Initially pegged at 5 percent of the federal credit, the state EITC was expanded under Governor George Pataki to the current level of 30 percent of the federal credit.

Mario Cuomo thought the EITC, and President Bill Clinton’s role in expanding it, was not sufficiently appreciated. From an October 1994 New York Times account:

Ask 15 people in the street whether they know the President had increased the earned-income tax credit, [Mario Cuomo] said, and not one will have heard about the important program for lower-income working families.

“That’s not your fault and it’s not mine,” he told reporters. “They just didn’t tell the story.”

The current governor, it seems, wants to tell a very different story.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

82 Questions Hochul’s Pandemic Report Should Answer

This is the month when New Yorkers are due to finally receive an official report on the state's response to the Covid-19 pandemic, one of the deadliest disasters in state history. T Read More

New Jersey’s Pandemic Report Shines Harsh Light on a New York Scandal

A recently published independent review of New Jersey's pandemic response holds lessons for New York on at least two levels. First, it marked the only serious attempt by any state t Read More

Hochul’s ‘Straight Talk’ on Medicaid Isn’t Straight Enough

Arguably the biggest Medicaid news in Governor Hochul's budget presentation was about the current fiscal year, not the next one: The state-run health plan is running substantially over budget. Read More

DeRosa Is Still Hiding the Truth About Cuomo’s Pandemic Response

As the long-time top aide to former Governor Andrew Cuomo, Melissa DeRosa ought to have useful information to share about the state's pandemic response – especially about what went wrong and how the state could be better Read More

One Brooklyn Health’s Money Troubles Raise a Billion-Dollar Question

A brewing fiscal crisis at One Brooklyn Health, which has received more than $1 billion in turnaround funding from the state, raises the question of whether that money has been well spent. Read More

Beware of Medicaid’s Spending Swings

The state's Medicaid spending is becoming increasingly volatile from month to mo Read More

Emails Confirm That Cuomo’s Staff Launched Its ‘Book’ Project in March 2020

A pair of state-employed writers began researching, outlining and drafting a book about Governor Andrew Cuomo's pandemic response in late March 2020, weeks before New York's harrowing first wave had passed, according to newly disclosed email records. Read More

A Politically Active Medical Group Gains Access to Funds for ‘Distressed’ Providers

A politically connected medical group in the Bronx garnered an unusual benefit in the new state budget – access to money previously reserved for financially troubled safety-net hospitals and nursing homes. Read More