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The Empire

How Cuomo outflanked the left, mollified the right, and (yet again) came out on top of everyone

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Update: Some good reactions from key folks, courtesy of WNYC's Ilya Marritz.

Couresy of the Governor's office.

Governor Andrew Cuomo is receiving significant praise for the (all but certain) passage of a tax reform package today. Sure, not everyone loves it, but for the most part Cuomo has yet again managed to expertly sail the gale-blown political seas in Albany, all the while avoiding the siren calls from either end of the political spectrum.

So how did he do it? With geometry! He employed a three-dimensional solution to a two-dimensional problem.

Jacob Gershman of the Wall Street Journal has what may be the definitive piece on Cuomo’s slow turn on tax reform. But the truth is the Governor was able to solve a singular problem—the debate over the millionaires’ tax—by going beyond it to solve a bigger problem—the tax code—all the while outmaneuvering those on both his left and right.

On his left he had labor unions and progressive members of the state legislature, emboldened by the Occupy Wall Street movement, demanding the Governor not sacrifice spending on things like education, and programs for the poor for a promised lower tax rate on higher-income earners starting January 1, 2012.

On his right he had Senate Republicans and business leaders echoing back to him those same promises not to raise taxes at a time when the State’s economy remained weak. Likewise, Cuomo has put a lot of stock in his efforts to make New York appear “Open for Business”—changing the state’s image as a high-tax, high-regulation state is crucial to the Governor’s sensible centrist mission.

As I reported a month ago, the Governor couldn’t afford to look like he was backpedalling or caving on his previous promises and positions—despite reports that he wasn’t keen on doing so. What the Governor needed was an opportunity:

[T]he only way Cuomo can change on this is if it looks like he’s evolving—not flip flopping—on the issue. For this to happen a new piece needs to come into play: a game changer that allows for the narrative to move back in the Governor’s favor.

Enter a $3.5 billion pivot point.

The state’s “grim” economic forecast for next year was just the news the Governor needed to change the conversation from tax increases to budget deficits. But there was still one more piece: How to present his change—his evolution—that kept it from looking like a cave to those calling him “Governor 1%” while making it palatable to what have become crucial allies in the Senate Republicans?

The answer is that you provide a three-dimensional solution to a two-dimensional problem.

Cuomo framed the argument as an economic stimulus package instead of one about taxing rich people. He was able to outflank his opponents on the left—who were entirely focused on the millionaires’ tax—while pacifying conservative lawmakers keen to stick with a Governor who has become their best chance at keeping their majority in the Senate.

Rather than a tax increase, you modify the tax code to give breaks to New Yorkers making less than $150,000 (Republicans are psyched), as well as higher income earners because you haven’t let the “millionaires’ tax” sunset. Who cares if they would have seen their taxes drop by nearly two percent on January 1 (Democrats are pumped)?! It’s a tax break now.

You sweeten the deal with a promise to help chronically unemployed inner city youth (downstate Dems cheer), throw in a cut to the hated MTA payroll tax (suburban Republicans high-five) that’s MTA-budget neutral (transit advocates do the worm), promise tax breaks on business (Wall Street chest bumps ), add aid to all those upstate communities still hurting from those awful storms earlier this year (rural electeds join arms in a jig of joy) and, well, you have Governor Andrew the Great pointing at the dysfunctionalcrats in Washington and saying, “This is how New York gets it done!”

Yes, this is an awesome victory for the Governor. But after all the back slapping and fist pumping, what we really have is a real millionaires’ tax, some tax cuts, and a $1.9 billion down payment on a $3.5 billion budget gap. Lawmakers will make their way back up to Albany in a month to hammer out the details on closing the remaining $2.1 billion gap. But maybe more importantly some big ticket items leftover from last year—the taxi hail bill, pension reform, gambling legalization, redistricting, mandate relief and host of other major legislative issues await.

The Governor should enjoy this victory for as long as he can. The next round of political and legislative battles may not be so easy.

But you don't have to take my word for it:

(Thanks to WNYC's Ilya Marritz for the following.)

Michael Kink of the Strong Economy for All Coalition:

I know that Governor Cuomo did not like the moniker ‘Governor One Percent’, I know he did not like seeing signs that said ‘Cuomoville’. I think in his heart he wants to be a progressive leader.

EJ McMahon of the Manhattan Institute:

He’s been fairly transparently trying to shift the narrative on its head for at least four or five weeks now. He began seizing on every change in economic situations and fiscal numbers and exaggerating their impact and implications…He and his staff began citing all of these things in a sort of hyperexcited way as game changes that had radically changed the situation.

Kenneth Langone, Home Depot co-founder and Cuomo confidant:

The Governor called me on a couple of occasions to talk to me about the state and the needs. And he asked my opinion and I told him that I thought he’d made significant progress on the expenditure side and the thing we didn’t need in New York was gimmicks. So I think what he’s done is to eliminate a gimmick. Because the $3.5 billion deficit did not take into account the millionaire’s tax.