New York deal: More taxes for rich, fewer for middle class
New York’s governor and legislative leaders struck a deal Tuesday to raise taxes on the wealthy and slightly reduce them for the middle class. The deal reflects the first restructuring of the New York tax code in years and will net an additional $1.9 billion in revenues for the state in 2012.
The plan -- negotiated in record speed considering Albany’s usual gridlock -- is expected to be approved by the state Legislature in the next few weeks.
"Our state government has come together in a bipartisan manner to create jobs, grow our economy and, at the same time, enact a fair tax plan that cuts taxes for the middle class," Gov. Andrew Cuomo said in a statement released with state leaders.
Cuomo noted that the deal creates the lowest tax rate for the middle class in 58 years.
Despite pressure from his own party leaders and Occupy Wall Street protesters who have been railing about income inequity, Cuomo had been adamant about keeping a campaign promise to eliminate a so-called millionaires tax -- a 7.85% to 8.97% tax rate for those earning more than $200,000.
This new plan adds three more years to that higher rate, or surcharge, only for those making more than $2 million, although it slightly drops the rate to 8.82%.
At the same time, 4.4 million households that have paid at a 6.85% tax rate will benefit from $690 million in income tax cuts. New Yorkers who earn between $40,000 and $150,000 will see their marginal tax rate drop slightly to 6.45%; those who make between $150,000 and $300,000 will pay a 6.65% rate. People earning between $300,000 and $2 million will be taxed at the same 6.85% they were set to pay when the surcharge expired at the end of the year.
The future of the new tax rates is unclear. They are set to expire in 2014 but the proposal calls for a 13-person commission to study the state’s tax code and make recommendations.
“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 the statement.
Since he took office a year ago, the Democratic governor -- who is the son of a previous governor -- has had a relatively smooth transition working with leaders in both parties. Ultimately, he argued that the tax rate was “unfair” and needed to be more progressive and generate more revenues at a time when the state was facing a $3.5-billion deficit.
State Assembly leader Sheldon Silver, a powerful force in Albany, saidin the statement that he agreed with the governor that the tax rate had to be reformed. "Someone who makes $50,000 should not be paying the same tax rate as someone making $5 million," he said. "With Gov. Cuomo's leadership, we have forged a bipartisan plan that is fair to all New Yorkers and will help build a brighter economic future for this state."
Photo: New York Gov. Andrew Cuomo leaves the Capitol in Albany on Tuesday after striking a deal to cut taxes for most middle-class families by $300 to $400 and raising taxes on people who earn more than $2 million. Credit: Mike Groll / Associated Press