New York: Governor David A. Paterson and leaders of the Legislature have reached a deal to temporarily raise taxes on New York’s highest earners to close the state’s yawning budget deficit, said lawmakers and officials .
The plan, which would expire after three years, would represent the largest income tax increase in recent state history, significantly larger than the surcharges imposed from 2003 to 2005, when the state last faced a major recession.
The plan would raise $4 billion a year by creating two new tax brackets, the highest one affecting those who earn $5,00,000 or more. If approved by rank-and-file lawmakers in the Assembly and state Senate, the tax increases would be a major victory for unions and liberal advocacy groups and a signal of the new balance of power in Albany, where Democrats won control of both Houses of the Legislature and the Governor’s office in last year’s election.
Officials said Mr. Paterson, who has argued for months that new income taxes should be a last resort for balancing the budget, accepted the plan after winning significant spending cuts in areas like health care and education.
Mr. Paterson’s willingness to accept the new taxes reflects, in part, how rapidly the state’s finances are deteriorating. Since proposing his budget in December, projected tax revenues for the fiscal year beginning April 1 have dropped by $3.2 billion, while rising Medicaid caseloads will cost $750 million more than originally projected for this year and next year. That shift has left Mr. Paterson and lawmakers with little choice but to employ every possible mechanism for shrinking budget gaps, including enormous cuts as well as new taxes. The highest bracket would start at $5,00,000 with a tax rate of 8.97 per cent — the same as New Jersey’s current highest rate. A lower rate of 7.85 per cent would apply to incomes over $3,00,000.
Currently, New York’s highest tax rate, 6.85 per cent, kicks in for couples and joint filers making more than $40,000. “It’s a profound breakthrough for tax fairness,” said Dan Cantor, executive director of the Working Families Party. “The era of phony prosperity has ended, and a new era of real shared sacrifice must begin.” — © 2009 The New York Times News Service