New NY tax bill hits millionaires, helps middle class
Thu, 08 Dec 2011 11:20:01 GMT —
New York's second major income tax increase in two years will charge millionaires more, but give 4.4 million middle-class residents a rare break worth $200 to $400 a year.
Under the plan backed by Gov. Andrew Cuomo, which the state Senate passed 55-0 Wednesday night and the Assembly approved 130-8 early Thursday, those tax breaks will go to most households with annual earnings of $40,000 to $300,000, or single filers making $20,000 to $150,000 a year.
To pay for it, the state will rely on households making over $2 million or single filers making $1 million to pay higher taxes. Their income tax rate will increase from 6.85 percent to 8.82 percent on Jan. 1.
"This was a function of an economic reality and deteriorating economic conditions," Cuomo said after the Senate vote. He said it should help stimulate jobs with some of the tax cuts and construction spending, while closing about $1.5 billion of a projected $3.5 billion state deficit next year with higher revenues overall.
The tax increase will raise $2 billion to pay for the middle-class tax break, a break in the New York City transit tax for small businesses, a public-private infrastructure repair fund, a tax break for manufacturers, and $50 million in aid to upstate communities trying to recover from historic flooding in the late summer. The funding is also expected to avoid another year of cuts to education and health care.
"I think we are doing absolutely fabulous in terms of the middle-income, hard-working taxpayers of the state," said Senate Majority Leader Dean Skelos, a Nassau County Republican.
"It's the first time we've lowered those rates in 50 years," Skelos said.
Meanwhile, households making $300,000 to $2 million - or single filers making $150,000 to $1 million a year - will pay the same 6.85 percent rate they would have paid come Jan. 1, when a temporary tax surcharge expires.
The three-year package agreed to by Cuomo and legislative leaders provides a new tax structure that continues to hit millionaires harder. A 2009 bill at the beginning of the state's fiscal crisis created a temporary surcharge that increased the income tax rates for New Yorkers making $200,000, hitting millionaires with the highest rate just 0.15 of 1 percentage more than the new rate approved by Cuomo, Skelos and Assembly Speaker Sheldon Silver.
"We're cutting taxes, in my opinion," Skelos told reporters.
Some questioned that logic.
"So, for the next three years, New York will continue to have one of the nation's six highest tax rates," said E.J. McMahon of the fiscally conservative Manhattan Institute. He said New York City residents will pay the highest income tax rate in the nation, at 12.5 percent.
He said the maximum savings will be just $600 a family with a household income of $300,000, while a family of four making $65,000 will save about $222.
The millionaire employers who Cuomo and Skelos once warned would move to Connecticut or New Jersey if they were targeted for tax increases again face three more years at higher rates.
"Maybe Shelly Silver is raising taxes, but we're cutting taxes," Skelos told reporters.
For a year, Silver has pushed for a millionaire tax. But he was strongly opposed by Skelos who said it conflicted with basic Republican values, and by Cuomo who promised in his campaign to freeze taxes in what he called one of the most heavily taxes states in the country.
"I think we were able to put together a good package and showed that government in New York is functioning, that we are different from what is happening in Washington," Silver said. "We are facing the same economic climate and we are trying to do something about it ... and we will not be faced with the severity of cuts that we would otherwise be faced with next year. We're putting fairness and equity into our tax code."
Until last week, a millionaire tax was officially dead in Albany, according to both Cuomo and Skelos.
But in the last week, Cuomo instead led the Legislature toward Silver's top priority. Cuomo made the case that the world and national economies continued to be unstable, while weak revenues created an unexpected $350 million deficit this year and a projected $3.5 billion deficit for 2012-13.
"While I am against higher taxes and I believe our long-term economic future for this state is enhanced by in fact lowering taxes to make us more competitive ... If I were to close the entire gap by budget cuts it would decimate essential services doing real harm to the state's economy and strangling local governments all across this state," Cuomo said.
The Assembly's Republican minority was alone in criticizing the deal.
Assembly Republican leader Brian Kolb said "taxes are being raised in New York state and we are still not dealing with our state's serious spending problem ... tax hikes have never been the answer for creating more private sector jobs and long-term prosperity for New Yorkers."