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Marijuana legalization, wealth tax hike and sports betting – New York enters budget season

ALBANY – The state Senate and Assembly are scheduled to vote Monday on their versions of New York’s 2021-2022 budget – and stark differences remain between their proposals for raising taxes on the wealthy and legalizing online mobile sports betting and what Gov. Andrew M. Cuomo has said he supports.

The two legislative chambers posted their one-house budget bills online over the weekend, planning for more than $200 billion of spending. These budgets are meant to plant a flag for each chamber about their policy priorities and goals, and they are subject to negotiation between the leaders or representatives of the Executive Chamber, Assembly and Senate. The governor, constitutionally, has tremendous sway over how the budget is written and edited, but it remains to be seen how his politically-weakened stance – as a result of the COVID-19 nursing home deaths and sexual harassment allegations facing him – will influence negotiations.

There are dozens of proposed programs and policies ranging from investment in New York’s economy, mental health in schools, higher education, child care, clean energy, climate change mitigation and many other areas. Three of the most high-profile and contentious areas of debate for this budget cycle have been recreational marijuana legalization, legalization of mobile sports betting and raising taxes on the wealthy.

For marijuana, it appears that a deal is being struck outside of the budget process, as it’s not included in either of the one-house budgets, despite having broad support and being backed by Cuomo. It’s a surprising development, as the governor traditionally draws as much policymaking into the budget process as he can, which allows him to control the outcome more. Newsday reported that lawmakers are forging ahead on a deal before the budget deadline at the end of this month.

“I am very optimistic about completing negotiations and having a three-way agreed-upon bill to legalize marijuana before the budget. Discussions are ongoing and we’re very close.” Sen. Liz Krueger, a Manhattan Democrat, told Newsday.

For online sports betting, it has been broadly expected by political leaders that this is the year it will pass. Sports betting is already legal at casinos on-site in New York, and this would allow residents to use mobile apps to open up their sportsbooks. This has the potential to generate hundreds of millions of dollars in revenue for the state.

Cuomo’s proposal would be state-run, through the Gaming Commission, while the two legislative proposals would create a competitive market. The competitive market would work by allowing the state to sell licenses, known as “skins,” to a number of casinos, Native American tribes, and race tracks or other facilities, which could then operate servers to open up the state to mobile sports betting.

Sen. Joseph Addabbo, Jr., a downstate Democrat and the main champion in the chamber for mobile sports betting, believes that the competitive proposal would allow for a more flexible and open market for mobile sports betting, while Cuomo’s administration is pushing for the state-run model because it would allow the state to hang onto more of the revenue. This divide between Cuomo and the Legislature has existed all year, and the stalemate persists.

“It’s commonplace for this every year that there’s an issue that evolves through these kind of discussions, and in the end there’s a compromise,” Addabbo said. “Things can happen, things can change and morph and evolve over the next two weeks.”

Finally, the last big divide is a tax hike on the wealthy. Legislative leaders have supported raising the tax rate on New York’s highest earners for some time, even considering a special session late last year to pass standalone bills, although that never occurred. Cuomo had said he was open to the idea, but only would push for it if the federal government did not provide the $15 billion the state needed to meet its budget gap. The governor has historically tried to avoid tax hikes, and his budget director in January emphasized that New York is very reliant on its wealthiest residents for tax revenue, and can’t afford to run them out of the state.

New York is receiving about $12.5 billion from the recently passed COVID-19 stimulus bill. Cuomo has endorsed marginally raising taxes on the wealthy, while the Assembly and Senate want to go further. The Assembly version, for instance, would raise the tax rate on those making more than $1 million or couples earning more than $2 million by about 1 percent, and about another percent higher for those earning between $5 million and $25 million, and another percent for upwards of $25 million.

The Assembly estimated that this would bring in $4.3 billion in revenue.