Details aren’t yet settled, but news reports this morning quote Senate Republican Leader Dean Skelos as saying the 2013-14 state budget will include $700 million in tax cuts. Other reports and rumors suggest a somewhat smaller amount.
We’ll see soon enough. Meanwhile, as Capitol reporters and lobbyists disappear down the rabbit hole of Albany budget spin, keep in mind what then-Attorney General Andrew Cuomo said in 2010 when asked if he would agree to an extension of a temporary tax increase:
It was supposed to sunset. If it doesn’t sunset, it’s a tax [hike].
Speaking in his characteristic staccato style, Cuomo was not taking some unusual or idiosyncratic position. He was simply employing a common yardstick for evaluating the fiscal impact of policy changes: the current-law baseline.
It’s not complicated.
A tax cut is a change to current law that reduces tax liability compared to the baseline amount.
A tax increase is any change to law that results in a permanent or temporary increase in taxes (i.e., tax liability for taxpayers) compared to the baseline.
So, if the next state budget extends a temporary increase in the personal income tax rate paid by high-income households, that will constitute a tax increase. If it extends any portion of the temporary $500 billion energy tax increase — the so-called 18-A utility “assessment” — beyond the currently scheduled expiration date next year, that also constitutes a tax increase.
By the same token, if the utility assessment were allowed to expire on schedule, that would notconstitute a tax cut.
And if the sunset of one tax — along with a smattering of other new tax breaks — is financed by extension of a much larger temporary tax, the net result will still be a tax increase.