New York lawmakers approved Governor Andrew Cuomo’s plan to overhaul the state tax code by raising rates on the wealthiest residents and cutting them for millions of married couples earning less than $300,000 a year.
The measure passed the Assembly early today after winning Senate approval yesterday. The deal was announced Dec. 6 in a joint statement by Cuomo, Assembly Speaker Sheldon Silver, a Democrat, and Senate Majority Leader Dean Skelos, a Republican.
Cuomo, 54, had vowed not to raise levies, and his opposition to extending a so-called millionaire’s tax -- actually a surcharge on income above $200,000 for individual filers -- drew criticism from fellow Democrats, unions and the Occupy Wall Street protest movement. The governor changed his stance after a midyear report showed a budget deficit of $350 million this year and a $3.5 billion gap in the fiscal year beginning April 1.
“This is a different economic reality than anyone could have anticipated,” Cuomo said during a press conference in Albany last night after the Senate approved the tax plan. “For this new reality that we’re facing, this is the best decision.”
The plan will raise about $1.9 billion in new revenue, less than the $4 billion generated by the millionaire’s tax, which expires Dec. 31. About $400 million will be spent on flood recovery and a youth-employment program, and the remaining $1.5 billion will be put toward the deficit, said Morris Peters, a Budget Division spokesman.
The votes signaled yet another legislative victory for Cuomo, who took office in January. During the session that ended in June, he pushed through an on-time budget that closed a $10 billion gap, an ethics package, a property-tax cap and a bill to permit 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 is one of four states, along with California, Missouri and Washington, to report midyear budget deficits, according to the Denver-based National Conference of State Legislatures.
Without the expiring surcharge, individuals who earn $21,000 are taxed at 6.85 percent, the same as someone who makes $21 million. The plan creates new income brackets. The first, from $40,000 to $150,000 for joint filers, will be taxed at 6.45 percent. Those who earn $150,000 to $300,000 will have a 6.65 percent rate, while there will be no change for those making $300,000 to $2 million.
The tax on the top bracket, $2 million or more for couples, will rise to 8.82 percent and expire in December 2014. For individual filers, the top rate will start at $1 million.
Including the surcharge, those earning more than $500,000 had been taxed at 8.97 percent. New York’s new top rate is lower than the 8.97 percent levy in New Jersey, though higher than the 6.7 percent rate in Connecticut.
“New York has left the middle class with an undue burden which also hinders economic recovery,” Cuomo said in a Dec. 5 statement. “Fairness dictates that the more you make, the more you pay and the higher your income, the higher your rate.”
New Tax Rates for Joint Filers Income Level Rate $40,000 to $150,000 6.45% $150,000 to $300,000 6.65% $300,000 to $2 Million 6.85% More than $2 Million 8.82% Previous Rates for Joint Filers (Includes 2009 surcharge expiring Dec. 31) Income Level Rate $40,000 to $150,000 6.85% $150,000 to $300,000 6.85% $300,000 to $2 Million 7.85-8.97% More than $2 Million 8.97% Old Rate (Before Surcharge) Income Level Rate More than $40,000 6.85%
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