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Tax cuts focus of state budget talks amid New York pre-K funding debate

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WASHINGTON — Maybe New York Gov. Andrew M. Cuomo should borrow a pair of crutches. They might have helped Minnesota Gov. Mark Dayton’s cause.

Dayton, a Democrat, hobbled into the state Capitol five weeks after major hip surgery and blasted lawmakers for holding up the tax cuts he wanted. After quarrelling over his spending proposal, including a spat over funding for a new legislative office building, the Democratic-controlled legislature approved a $443 million tax cut, without the office building rider. Dayton pushed hard for the cuts, in part, because some are retroactive to 2013, meaning tax filers who are preparing returns now could take advantage of them and see refunds soon.

Meanwhile, Cuomo is locked in a battle with the legislature and New York City Mayor Bill de Blasio over whether to increase taxes to fund prekindergarten education in the city and state. The mayor wants to raise the surcharge on city earners making more than $500,000 annually, from 4.25 percent to 4.45 percent. The state has to approve city tax increases.

Fellow Democrat Cuomo said finding money for pre-K can be accomplished without a surcharge on the wealthy. Instead, he wants tax cuts, including a property tax reduction that he said would save the average homeowner about $350 a year. The legislature is struggling with the tax increase proposal and has not acted, but the Republican-controlled Senate is not inclined to give de Blasio what he wants. Both Dayton and Cuomo are running for re-election.

At least 30 states are considering some kind of tax change this year, mostly tax cuts, as the economic recovery takes hold. In states where revenues have failed to keep up with estimates, some lawmakers are considering raising taxes.

In Delaware, where revenue projections are down from earlier estimates, there is talk of corporate tax increases. The Delaware Economic and Financial Advisory Council projected that revenues in the current fiscal year that ends in June will fall $107 million short of a previous projection in December, due mostly to lower revenues from corporate income taxes. That has led Democratic Gov. Jack Markell to propose an increase in corporate taxes — ironic for a state that is viewed as the most corporate-friendly in the U.S.

In New Jersey, however, where revenues are estimated to be lagging as much as $400 million behind projections, Republican Gov. Chris Christie has not proposed new taxes in his fiscal year 2015 budget.

A trial balloon by Democratic Sen. Raymond Lesniak to increase the state’s gasoline tax to fund infrastructure repair has stirred up a firestorm, causing him to lower the proposed increase from an extra 24 cents per gallon to 15 cents.

A recent poll by Fairleigh Dickinson University showed 72 percent of those surveyed opposed increasing the gas tax, while 63 percent called for a higher tax on millionaires instead.

Republican governors are having an easier time with tax cuts, particularly in states where the GOP also dominates the legislatures, but squabbles remain in many states in the thick of legislative sessions this spring.

A survey of state lawmakers by the National Conference of State Legislatures found tax policy topping the agenda in about a dozen states this year and being a significant part of the discussion in many more. At the same time, states still worry about the economy.

“We still have high unemployment, and there are a lot of unknowns about when the next downturn will occur,” Democratic Sen. Richard Devlin, chair of Oregon’s Joint Committee on Ways and Means, said in the NCSL survey. “We are better off than a few years ago, but we are reluctant to use the word ‘stable.’ There is nothing to celebrate.”

Still, tax cuts are on the table. Cuomo traveled around New York this week pressing for his property tax reduction. “Homeowners get it. Taxpayers get it. The politicians don’t get it,” Cuomo said in a press conference in DeWitt.

He is urging local jurisdictions to make up for the lost property tax revenue by finding ways to combine services to save money. “The easy answer for government is raise taxes. If the choice is change how you are doing things, find economies of scale, get creative, work with local governments in a way you’ve never done before,” he said. “Raising taxes is always the easy answer. That’s why we have the highest taxes in the nation. That’s why people are leaving upstate New York.”

In Minnesota, the tax cuts provide $57 million in retroactive tax relief on returns filed for 2013, meaning that up to 270,000 state taxpayers will get some of the $49 million in income tax cuts in their tax refunds this year, according to the state Department of Revenue.

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