New York Governor Andrew Cuomo and legislative leaders reached an agreement to temporarily raise the tax rate on wealthy earners and cut taxes for those earning less than $300,000 as part of a plan to generate about $2 billion in revenue.
The deal also establishes a fund that would combine $1 billion in public cash with money from private pension funds and investors to improve New York’s infrastructure. Cuomo released the plan today in an e-mailed statement jointly sent by Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver.
The Assembly may vote on the deal tomorrow after Silver said he recommended the Democratic majority approve it. Senate Republicans, who hold a one-vote edge, are to meet tomorrow to discuss the proposal.
“This job-creating economic plan defies the political gridlock that has paralyzed Washington and shows that we can make government work for the people of this state once again,” Cuomo said in a statement.
If the deal is approved by lawmakers, it will become the latest legislative victory for Cuomo, a 54-year-old first-term Democrat. During the session that ended in June, Cuomo pushed through an on-time budget that closed a $10 billion gap, an ethics package, a property-tax cap and a bill that legalized same-sex marriage in the third-most-populous U.S. state.
Last week, the governor said revenue is “collapsing” amid shrinking Wall Street bonuses and job cuts in the finance industry, which accounted for more than 20 percent of wages paid by businesses in 2010. New York has projected a $3.5 billion deficit in fiscal 2013, which begins April 1, and a $350 million gap this year. It’s one of four states, along with California, Missouri and Washington, to report midyear budget deficits, according to the National Conference of State Legislatures.
The new tax code would generate $1.9 billion in additional revenue while also cutting taxes for 4.4 million middle-class residents by $690 million, Cuomo said. A 2009 surcharge on those who earn $200,000 or more that’s set to expire Dec. 31 generated about $4 billion a year, according to the Budget Division.
Under the permanent tax code, those who earned $20,000 or more were taxed at 6.85 percent, the same as someone who made $20 million. The proposed changes create new brackets. The first, from $40,000 to $150,000, would be taxed at 6.45 percent. Those who earn from $150,000 to $300,000 would have a 6.65 percent rate, and earners from $300,000 to $2 million would be taxed at 6.85 percent.
The top bracket, $2 million or more, would rise to 8.82 percent and expire in December 2014. Under the expiring surcharge, known as the millionaire’s tax, those earning more than $500,000 were taxed at 8.97 percent. Cuomo opposed a push by fellow Democrats to extend the millionaire’s tax.
“New York has left the middle class with an undue burden which also hinders economic recovery,” Cuomo said in a statement yesterday. “Fairness dictates that the more you make, the more you pay and the higher your income the higher your rate.”
Skelos will have to sell the idea to fellow Republicans in the Senate, who have previously stood against tax increases. Because the plan cuts taxes on the middle class and reduces the rate for wealthy earners to below the expiring surcharge, Skelos can describe it as a tax cut.
“This comprehensive plan will reduce the tax rate for middle-class families to their lowest levels in more than 50 years,” Skelos said in the statement.
The overhaul has support from the Civil Service Employees Association, the state’s largest union, President Danny Donohue said in a statement.
“The agreement will produce practical benefits for all New Yorkers,” Donohue said. In August, the association agreed to wage freezes and furloughs to cut costs. The deal, combined with an agreement with the Public Employees Federation, the state’s second-biggest union, helped save $450 million.
The tax deal is a “step in the right direction, but unfortunately falls short in obtaining the goal of a fair tax system,” Federation President Ken Brynien said in an e-mailed statement
‘Wind of Change’
On Dec. 3, PEF encouraged its members to go door-to-door to build support for extending the expiring millionaire’s tax. Called “Knock for the 99%,” the campaign played on a reference to the Occupy Wall Street movement, which has seized on economist Joseph Stiglitz’s research that found the richest 1 percent of Americans control 40 percent of the wealth.
The deal “acknowledges that there’s a wind of change out there and is a reflection of that,” said Assembly Majority Leader Ron Canestrari after a party caucus meeting today.
The changes are part of a wider initiative to stimulate the economy that also includes the infrastructure fund and an agreement among Cuomo, Skelos and Silver to put up for a vote a constitutional amendment allowing casino gambling.
That would help “recapture revenue that is currently being lost to other states,” Cuomo wrote yesterday. Indian casinos already operate within New York’s borders, and slot machines are allowed at race tracks.
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