(Bloomberg) -- New York collected $2.3 billion less income-tax revenue than predicted for December and January, a development that Governor Andrew Cuomo blamed on wealthy residents leaving for second homes in Florida and other states that received more favorable treatment in the tax law enacted by President Donald Trump and the Republican Congress.
The shortfall will require a new look at the $175 billion budget Cuomo submitted to the legislature last month, he said. If the trend continues, the governor said it would affect spending on high-expense items such as health, education, infrastructure and a planned middle-class tax cut.
"There is no doubt that the budget we put forward is not supported by the revenue," the Democratic governor said during a news conference in Albany. "If even a small number of high-income taxpayers leave, it has a great effect on this tax base. You are relying on a very small number of people for the vast amount of your tax dollars."
While acknowledging that stock market volatility is among several factors that may have suppressed income-tax revenue in the past two months, the governor placed most of the blame on Trump and the Republican-dominated Congress of 2017, which enacted a tax plan limiting federal deductions on real estate and other local taxes.
"It was politically diabolical and also highly effective," Cuomo said. "And if your goal is to help Republican states and hurt Democratic states this is the way to do it."
He vowed to pursue legal challenges against the tax plan, citing its unequal impact, increasing tax liability for residents of New York, California, New Jersey and Connecticut, while reducing it in southern states such as Florida, where many of New York's wealthiest residents own second homes.
"They are investors, they have accountants, they are making informed decisions," Cuomo said. "This is going to be the tipping point and people will now be making a geographical change."
Cuomo, a Democrat, ridiculed members of his political party who are calling for higher state taxes on the rich, saying the top 1 percent of earners already account for about 46 percent of state income-tax revenue.
"Tax the rich, tax the rich, tax the rich -- and then the rich leave. And then what do you do?" he asked. "It would be the absolute worst thing to do right now. At the same time, you don't have the ability to reduce taxes on the rich because that would just expand the shortfall."
To contact the reporter on this story: Henry Goldman in New York at email@example.com
To contact the editors responsible for this story: Flynn McRoberts at firstname.lastname@example.org, Michael B. Marois, William Selway
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.