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  • New York Gov. David Paterson speaks during a news conference at the Capitol in Albany, N.Y., Wednesday, Feb. 11, 2009. Paterson is calling for a defining moment to cut New York state government's notorious overspending, while the Assembly now says sales tax increases must be considered along with higher income taxes to escape from a fiscal crisis that has gotten $1 billion deeper. Mike Groll

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February 25, 2009

Support builds for higher NY income tax on wealthy

By MICHAEL GORMLEY

ALBANY, N.Y. (AP) — Proposals to increase income taxes on New Yorkers making $250,000 or more are gaining support in the Legislature and with the public.

As similar "fair share" tax bills progress in the Senate and Assembly, both controlled by Democrats, a new poll shows 51 percent of New Yorkers prefer raising taxes on the wealthy over budget cuts.

"The support is clear," said Siena College pollster Steven Greenberg. "There's no question of the strong support you see for taxing wealthier New Yorkers is because most New Yorkers won't be affected by them ... people tend to like more things that affect other people than bad things that affect them."

The poll found most New Yorkers — 77 percent — support proposals that would raise the income tax rate on those making $1 million or more a year, while 59 percent support raising the rate for New Yorkers making $250,000 or more a year. Just 22 percent prefer additional budget cuts in education and health care over raising the rate.

But opponents of the proposals say they will send employers packing.

"When we put the 'fair share' tax increases in this model, we find that (the plan) reduces private sector jobs by about 22,000," said Jonathan Haughton, senior economist at Beacon Hill Institute and professor at Suffolk University, who testified before a hearing in Albany this week. "The fundamental problem here is that raising those taxes at the high end (is) not without an economic cost, and that economic cost is, in fact, that it will encourage people to set up elsewhere or to leave."

Gov. David Paterson still opposes the union-backed tax hikes, saying they could drive employers and their jobs out of the state. The conservative Manhattan Institute's Empire Center says the wealthiest 1 percent of New Yorkers already pay 41 percent of all state income taxes.

New "revenues are inevitable. How you do it, this is still open to debate," said Assembly Speaker Sheldon Silver, a lower Manhattan Democrat. Democrats who dominate his conference have passed a millionaire's tax before and there is significant support for some increase in the income tax for those making $250,000 or more a year.

The Senate's Democratic majority, with a much narrower 32-30 edge, is debating both proposals this week in a closed-door session. Senate Majority Leader Malcolm Smith of Queens said he's opposed to raising income taxes, but he will listen to his conference.

Supporters of the "fair share" proposals note a taxpayer making $40,000 per year faces the same tax rate — 6.85 percent — as someone making $4 million a year. Active proposals would increase the tax rate for those making $250,000 to $500,000 to 8.25 percent; increase the rate for those making $500,000 to $1 million to 8.97 percent; and increase the rate for those making over $1 million to 10.3 percent.

"I think the more people dig into the numbers and understand the depths of the fiscal crisis, the more they realize we are going to have to raise some revenues and a lot of us are convinced the fairest and least harmful way to do it is to raise some income taxes," said one of the bill's sponsors, Sen. Eric Schneiderman, a New York City Democrat.

Budget analyst E.J. McMahon of the Empire Center said there's no need for the income tax increase despite the state's fiscal crisis. He said the federal stimulus package, signed into law last week, will bring $24.6 billion to New York over two years, filling Paterson's proposed cuts for education and most of what he called modest cuts to health care.

"With that money, we shouldn't even talking about taxes," he said. "The reason unions want a tax increase is they really want a fairly standard spending increase in the budget and the reason they want it permanent is, after the stimulus goes away, we'll have a hole from the lost Wall Street revenues ... I think this is the way to preemptively keep the gravy train going."



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