New York raises taxes on wealthy

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The Wall Street Journal
By: Jacob Gershman
December 8, 2011

New York raises taxes on wealthy

New York lawmakers approved Gov. Andrew Cuomo's tax package, which would raise billions in additional revenue from wealthier residents but also sprinkle relief on middle-class earners.

The overhaul, passed unanimously Wednesday evening in the Republican-led state Senate and early Thursday by the Democrat-led Assembly, renews a portion of the state's so-called millionaire's tax, a surcharge on higher earners slated to expire on Dec. 31. Under the measure, higher personal-income rates are preserved for families with taxable income above $2 million--just not quite as high as they would have been under the expiring tax.

The package was championed by Mr. Cuomo, a first-term Democrat, who declared after the Senate vote, "It's a fair tax plan that I think will make a dramatic difference."

The vote in Albany came two days after California Gov. Jerry Brown outlined a plan to raise $6.8 billion a year that also leans on higher earners. Filing a bid for a ballot initiative that would put the plan's fate in the hands of voters, Mr. Brown proposed a graduated tax-rate increase of one to two percentage points that kicks in at $250,000 for individuals. He's also proposing a half-cent increase in the state's sales tax. The extra dollars would largely flow to public schools and universities.

In New York state, the increase is expected to raise $2.6 billion in additional revenue each year. About a quarter of that will pay for a small tax cut for those who earn below $300,000. The bulk of the rest, $1.5 billion, will help close next year's deficit, which had been estimated at $3.5 billion.

Mr. Cuomo had campaigned for office on an antitax platform that stood out within his party--and drew praise from national conservatives.

But the governor found himself buffeted by Wall Street protests, which became a rallying cry for state labor unions that advocated higher taxes on the wealthy. As President Barack Obama and Democrats in Washington pushed to raise taxes on millionaires, Democrats in Albany applied pressure on Mr. Cuomo to ease his stance.

Mr. Cuomo said his shift on taxes was unavoidable. He had counted on stronger revenues, but stagnant employment and a bleaker outlook for Wall Street bonuses wrecked his plans. Resorting to budget cuts alone, he said, would "decimate essential services."

"I think this is fair, I think it will benefit all New Yorkers in the long term," Mr. Cuomo said Tuesday, announcing the deal.

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