March 15 (Bloomberg) -- New York Governor Andrew Cuomo’s plan to let the state’s highest income-tax rate expire is opposed by fellow Democrats in the Assembly who propose to keep the top levy on those earning $1 million or more.
The 8.97 percent millionaire’s tax is included in a budget resolution before the Assembly, where Democrats hold a 99-to-51 advantage. A vote on the budget plan is expected in Albany today, according to Sisa Moyo, a spokeswoman for Assembly Speaker Sheldon Silver, a Democrat from Manhattan.
“It’s definitely better than nothing,” said Frank Mauro, an economist at the Fiscal Policy Institute, which advocated extending all the higher tax rates set to expire Dec. 31.
New York’s fiscal year begins April 1, and lawmakers in the Senate and the Assembly haven’t agreed on a spending plan with Cuomo. Under his proposed budget, the top tax rate would revert on Jan. 1 to 6.85 percent for taxpayers with incomes above $40,000. The 8.97 percent rate now applies to all taxpayers with incomes above $500,000.
A budget resolution in the Senate, where Republicans hold a majority, would leave Cuomo’s tax plan unchanged, while adding $280 million of spending for local schools, mostly rural and north of New York City, Senate President Dean Skelos, a Republican from Rockville Centre on Long Island, said at a press conference in Albany.
The Republican plan holds spending at about Cuomo’s level and pays for some increased outlays by eliminating $500 million of incentive grants the governor proposed for better-performing school districts.
The nonbinding plans in the Senate and Assembly are to be considered in conference committees where the two chambers iron out their differences. Cuomo may accept their plan or veto parts of it that create spending programs or increase outlays above his budget.
Retaining the higher tax through the end of 2012, as the Assembly is proposing, may produce $3.4 billion of revenue annually for the state, according to Ron Deutsch, a spokesman for New Yorkers for Fiscal Fairness, a coalition of citizen groups and unions. They want the extra revenue used to shrink the spending cuts proposed by Cuomo in his $132.5 billion budget.
The Assembly’s plan assumes $684 million more tax revenue than Cuomo’s, including the extension of the 8.97 percent tax rate, and would raise spending by $500 million to $133 billion.
The Assembly would use 30 percent of the additional revenue for school aid, according to a spending bill cited in the resolution. The remainder would be spread among other social programs, Deutsch said.
Cuomo, 53, was elected in November on a promise to balance the budget without raising taxes. He remains opposed to extending beyond Dec. 31 the higher personal income-tax rates approved in 2009, said Joshua Vlasto, a spokesman.
To close a $10 billion gap in his budget, Cuomo proposed Feb. 1 about $8.9 billion of spending cuts, below outlays called for under existing law. The biggest reductions were $2.85 billion in aid to schools and $2.38 billion in state spending on Medicaid, according to budget documents. His initial proposal for $2.85 billion of Medicaid cuts was reduced as the state lowered its estimates for cost of the program.
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