UPDATED April 5, 2020, 10:09 p.m.: New York state’s budget, which was due on April 1, is still being hashed out, but one thing it now appears likely to include is higher taxes for the state’s highest earners.
Gov. Andrew Cuomo and state lawmakers are closing in on an agreement to increase corporate and personal income taxes, the Wall Street Journal reported. The proposed hikes include raising the income tax rate to 9.65 percent for individuals making more than $1 million, and joint filers making twice that; upping the corporate franchise tax to 7.25 percent; and creating new tax brackets for the state’s top earners, with income over $5 million taxed at 10.3 percent and income over $25 million taxed at 10.9 percent.
Those changes could raise $4.3 billion per year toward school aid and rent arrears, including for small businesses, tenants and undocumented immigrants, people familiar with the deal told the outlet.
The proposed hike would hit the wealthiest New York City residents, who currently pay 3.88 percent to the city and 8.82 percent to the state. The state’s increase would raise their combined rate to between 13.5 percent and 14.8 percent.
The real estate industry has opposed such increases, claiming that they will drive wealthy residents from the state. Supporters of the increase say that did not happen when the first millionaires’ tax was passed in 2009.
Another proposal hated by real estate — the pied-a-terre tax — was not mentioned in reports about the negotiations. An income-tax hike would likely reduce the chances of a tax on second homes being approved.
The new taxes would expire at the end of 2027. But the initial millionaires’ tax was also temporary, only to be consistently renewed by the legislature and governor.
In an effort to bridge an anticipated $15 billion budget gap, Cuomo in January proposed a $1.5 billion income-tax increase. At that time, Cuomo expected the state would receive $6 billion in federal aid for the next two years. The federal aid turned out to be $12.6 billion, along with billions more for education and health care.
Cuomo has said that additional funding would remove the need for tax increases. But in the Democratic state legislature, the governor’s influence has been diminished, especially in the wake of investigations into allegations of harassment that have been levied against Cuomo. This would be the first time in his governorship that he has raised a tax rate. [WSJ] — Akiko Matsuda