Cuomo and Faso spat

Democratic New York State Gov. Andrew Cuomo and Republican U.S. Congressman for the 19th district, John Faso, have been engaged in a public spat over the Tax Cuts and Jobs Act (TCJA) that Congress passed in December 2017. Cuomo has been maintaining that the act specifically targets high-tax blue states like New York that are Democratic strongholds. He issued a letter to Faso on March 15 accusing him of not doing enough to try to stop that TCJA from passing. He wrote, “Those that did not actually vote for the bill had a moral and ethical obligation to demand that their leadership at least remove the New York penalty. New Yorkers will not accept your impotence as a defense. You are all part of the New York Republican delegation and can act together. We all know that in a legislative body, certain members are ‘let off’ the vote so they can claim impunity. That tactic fools no one and does not excuse the damage done to New York.”

Faso responded with a letter of his own and said, “Last year, you suggested that I should resign my office over this issue since I wasn’t able to halt passage of the legislation. No one took you seriously then, and I doubt anyone takes your criticism of me now seriously either.”

Cuomo also wrote, “Your suggestion that the $10,000 cap on the state and local tax (SALT) provision will protect ‘most’ of your constituents is also false. Independent estimates predict home values in the Hudson Valley and counties statewide would decline by approximately 10% [from levels] before this law was passed.”

Faso did not respond to that specific point, but accused Cuomo of engaging in “hyper-partisan attacks,” and he compared the governor unfavorably to his father. Faso wrote, “While Mario Cuomo certainly was a vigorous political combatant, he always conducted himself in a way which was compatible with his office. Although I had many disagreements with him, Mario Cuomo was at his core, a man of principle and honor. You, on the other hand, sir, are no such man.”

Another part of the spat has to do with Cuomo’s move to blunt the negative impact of the TCJA. Cuomo has proposed enacting a voluntary payroll tax in lieu of an income tax, which would then become deductible. He has also proposed creating charitable entities to which property owners could make donations that could then provide services to municipalities. These donations would take the place of property taxes and would theoretically be tax deductible.

Cuomo wrote to Faso “Now, you are trying to get the Internal Revenue Service to preemptively issue an opinion that our state’s legislative attempt to avoid the damage done by the Federal tax bill violates the IRS law. First, I don’t know how you could be seeking an IRS opinion when New York State has not even passed a law on which they could opine. Second, I don’t know why you would be trying to sabotage the state legislature’s efforts to undo the damage you have done to New York State taxpayers.”

Faso responded in his letter, “I’m surprised that you have not sought such an opinion on behalf of New York State taxpayers. Can you seriously believe that New Yorkers should be encouraged to donate to such a foundation without knowing whether the IRS will accept such contributions as a qualifying charitable donation?”

It is impossible to know if Faso was truly opposed to TCJA when he voted to oppose it. But it is clear that he voted twice to advance legislation that would have kicked thousands of his constituents off their healthcare insurance, so it’s easy to believe that the welfare of the residents of his district is not always his most important concern.

It is also true that without some changes in the state tax structure, the negative impact of TCJA will be keenly felt, especially in Sullivan County, where there is a large community of second-home owners. According to a 2008 study, “10,085 persons owned a second home in Sullivan County,” and 71% of those owners owned a primary home elsewhere in New York State and 19% owned a primary home in New Jersey, also a high-tax state.

Under TCJA, the first $10,000 in property taxes may still be deducted from federal taxes, but if a person owns one home in Sullivan County and another on Long Island or Rockland County or Teaneck, NJ, the property tax bill for those two homes will bring additional pain. And a quick survey of the tax records for the houses in Chapin Estates, for example, shows plenty of houses that have tax bills well beyond $10,000 just by themselves.

The property taxes paid by second-home owners and all property owners in New York go to support schools, fire departments, highway departments, libraries and more. As Cuomo pointed out, this is the first time in the history of taxation that the money used to pay these taxes will be taxed twice. More than a few Republicans will likely pay for that this fall, whether they voted in favor of the law or not.

 

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