NY ups tax on rich, cuts for middle-class

By Joan Gralla | Reuters – 2 hrs 39 mins ago...

NEW YORK (Reuters) - New York's millionaires will pay higher taxes while 4.4 million middle-class and upper-income New Yorkers will get tax cuts under a reform plan the governor and legislature unveiled on Tuesday.

The new top income tax rate for those who earn more than $2 million will rise to 8.82 percent. Without the agreement, this rate would have fallen to 6.85 percent -- the level in force before an income tax surcharge on millionaires was introduced. The surcharge expires this year after it pushed the top tax rate to 8.97 percent.

The pact, which still must be approved by both houses of the legislature, cuts the current rate for those who earn $40,000 to $150,000 a year to 6.45 percent from 6.85 percent.

Governor Andrew Cuomo, a Democrat, had repeatedly vowed not to raise taxes despite the state's looming budget gaps.

Though New York's wealthy will pay higher taxes than before the three-year surcharge, the middle-class will be paying the lowest rate in 58 years.

The governor's ability to forge a consensus contrasts with the federal government's impasse on revising income tax rates.

"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," Cuomo said in a statement.

Those who earn $150,000 to $300,000 will pay a 6.65 percent,

rate down from 6.85 percent. Those whose yearly incomes run from $300,000 to $2 million will all pay 6.85 percent, down from the current range of 7.85 percent to 8.97 percent.

The new tax brackets will only raise $1.9 billion, not enough to close both the $350 million hole in the current budget and the $3.5 billion deficit next year. This could set the stage for more harsh budget cuts and Democratic state Comptroller Thomas DiNapoli said: "It is critical that we spend within our means."

New York's middle class will save a total of $690 million under the new tax levels. The state relies heavily on income taxes for its revenue. Wall Street is the bedrock of its economy and its bankers and brokers are highly paid.

Mayor Michael Bloomberg, a political independent long opposed to raising taxes on the wealthy, had no immediate comment. The City Comptroller, the Speaker and the Public Advocate, all Democrats, praised the accord. It was criticized by the state's largest public workers union for not going far enough in taxing the wealthy.

The accord between Cuomo, Assembly Speaker Silver, a Democrat, and Majority Leader Dean Skelos, a Republican, would create a new public-private infrastructure fund to raise up to $1 billion from pensions and private investors. New York City would get $300 million for infrastructure projects from the Port Authority of New York and New Jersey. The state would advance $700 million to shift capital projects to next year from 2013 to help create jobs and boost the economy.

The new fund is expected to leverage $10 billion in direct capital investments to rebuild roads, bridges, parks, dams and flood control projects. It also would pay for upgraded water systems and educational facilities, and for making commercial and residential buildings use energy more efficiently.

The leaders pledged to pursue a "comprehensive gaming plan," which could open the door to legalizing casinos.

A payroll tax that helps fund the Metropolitan Transportation Authority, which runs New York City's buses, subways and commuter rail roads, would be abolished or cut for 294,000 taxpayers. The self-employment exemption would be raised to abolish the payroll tax for 415,000 more taxpayers. Public and private schools would become exempt. The state would make up the $250 million of revenue the MTA would lose.

A program to help inner-city youth, whose unemployment rate can run as high as 40 percent, would give clean energy, healthcare, advanced manufacturing and conservation business a tax credit for hiring unemployed youths. Some $37 million of funding would be spent on training, placements and the like.

(Reporting by Joan Gralla; Editing by James Dalgleish and Andrew Hay.)

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