Cuomo rallies Capitol

Two weeks ago, state lawmakers were on the brink of allowing a $350 million mid-year budget deficit and projected $3.5 billion deficit for the upcoming fiscal year to both go unaddressed, content to put off finding solutions until after New Year”™s when the Legislature would begin its 2012 session.

In that regard, last week”™s mobilization by Gov. Andrew Cuomo and the state Legislature was nothing short of unprecedented, as the Assembly and Senate both were called into special session Dec. 7 at the state Capitol to vote on a sweeping tax overhaul proposed just a day earlier by Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos.

Lawmakers from both sides of the aisle rallied behind the 11th-hour plan that promised to deliver $1.9 billion in new revenue, just as a 2009 personal income tax surcharge that brought the state roughly $4 billion in annual revenue was set to expire at midnight Dec. 31.

The overhaul seems even more remarkable, given that it is a major departure from Cuomo”™s campaign vow to not increase taxes.

The new tax plan represents a true “millionaires tax,” increasing the personal income tax rate on joint filers who earn more than $2 million while either decreasing or holding steady the tax rate paid by anyone earning less than $2 million. The changes will be effective starting Jan. 1 and lasting until Dec. 31, 2014.

Also included in the new provision were measures aimed at stimulating business development and investment, including a $1 billion infrastructure fund, a $50 million fund to be designated toward flood recovery efforts and the elimination or reduction of the MTA Payroll Tax for nearly 300,000 taxpayers. It was not immediately clear where the funding for the infrastructure fund would be drawn from.

Small-business owners ”“ many of whom have paid income taxes at a rate of 7.85 or 8.97 percent based on the 2009 surcharge ”“ looked to be among the biggest beneficiaries of the changes.

On the flip side, the state”™s highest earners will be faced with paying for the bulk of the tax cut. Had the 2009 surcharge been allowed to expire, they would have paid the same 6.85 percent income tax rate as all others earning more than $40,000.

As it stands, the roughly 31,500 taxpayers who earn $2 million or more ”“ most of whom are concentrated in the Hudson Valley, New York City and Long Island ”“ will be faced with an 8.82 percent income tax rate, according to the state Budget Division. Of those 31,500, just under half are non-residents.

By late afternoon on Dec. 7, a half-dozen members of the state Senate and Assembly who represent parts of the Hudson Valley had indicated to the Business Journal that they would support the measures, including Sens. Jeffrey D. Klein, David Carlucci, Suzi Oppenheimer and Greg Ball, as well as Assembly members Robert J. Castelli and Amy Paulin.

Castelli, while he supported the legislative package as a whole, expressed regret that no mandate relief measures were included. “It”™s still my belief that without mandate relief the tax cap becomes an onerous burden on our local municipalities.”

The Business Journal reached out to but did not receive responses from several other area representatives.

The proposal came after two-thirds of New York voters surveyed by Quinnipiac University signaled they would support the extension of the “millionaires tax.” In the poll, released Oct. 27, 66 percent were in favor of an extension with just 26 percent against the measure. Among those surveyed with earnings more than $100,000, two-thirds also supported the extension of the tax.

Businesses and advocates from around Westchester joined the county”™s representatives in Albany in applauding the new measure, which proponents of the overhaul said would restore balance and fairness to the state”™s tax structure while helping to offset a portion of the projected 2012 fiscal year budget deficit.

Leonard S. Schleifer, president and CEO of Regeneron Pharmaceuticals Inc. and co-chairman of the Mid-Hudson Regional Economic Development Council, said that the measure was a positive step for New York.

“I”™m pleased that there was a bipartisan agreement to move forward, not just on the tax issue but also on the New York Works agenda. If you put it in its entire context, I think this is overall the right direction that New York needs to be heading in for economic development,” Schleifer said.

Business Council of Westchester President and CEO Marsha Gordon said she was “thrilled” to learn about the proposal, adding that the changes within would “provide real meaningful relief to our members and the business community, paving the way for job creation and economic development.”

Westchester County Association President William M. Mooney said that he may not have agreed with everything Cuomo proposed, but nonetheless echoed Gordon in expressing his excitement in the bipartisan effort that brought about the overhaul measures.

“Here ”“ wow ”“ to get this action done is a total reversal of a culture that has been taking place for years and years now. Collaboration ”“ it”™s like a new word in their vocabulary,” he said.

At the Nelson A. Rockefeller Institute of Government at the University of Albany, deputy director Robert Ward said that few stand to gain more politically than Cuomo as a result of the legislative package, adding that this legislative victory “will represent another major demonstration of the governor”™s ability to direct the agenda.”

 

The following apply to joint filers

• Prior to 2009, the New York state tax code called for each taxpayer to pay income taxes based on the following scale:
  • Revenue of $0 to $16,000 ”“ 4 percent
  • $16,000 to $22,000 ”“ 4.5 percent
  • $22,000 to $26,000 ”“ 5.25 percent
  • $26,000 to $40,000 ”“ 5.9 percent
  • Over $40,000 ”“ 6.85 percent
• Between 2009 and 2011, based on the personal income tax surcharge ”“ or the so-called “millionaires tax” ”“ joint filers earning more than $300,000 were subject to higher rates:
  • $300,000 to $500,000 ”“ 7.85 percent
  • Over $500,000 ”“ 8.97 percent
• Had the surcharge been allowed to expire on Jan. 1, income tax payments would have reverted back to pre-2009 rates. However, under Gov. Andrew Cuomo”™s proposal, the following rates will apply:
  • Revenue of $0 to $16,000 ”“ 4 percent
  • $16,000 to $22,000 ”“ 4.5 percent
  • $22,000 to $26,000 ”“ 5.25 percent
  • $26,000 to $40,000 ”“ 5.9 percent
  • $40,000 to $150,000 ”“ 6.45 percent
  • $150,000 to $300,000 ”“ 6.65 percent
  • $300,000 to $2 million ”“ 6.85 percent
  • Over $2 million ”“ 8.82 percent