12/09/2011 03:34 pm ET

Most New Yorkers Taxpayers To See Their Rates Drop


Most New York taxpayers will see their overall income tax rates trimmed slightly next year following overwhelming legislative approval of the bill Gov. Andrew Cuomo plans to sign.

However, it's expected to generate an estimated $1.9 billion in new revenue, meaning a net tax increase in a plan that is drawing criticism from both ends of the political spectrum.

The fiscally conservative Manhattan Institute said it breaks Cuomo's promise not to raise taxes in an essentially modified extension of the surcharge on top earners that otherwise would have expired.

The Occupy Albany movement, which has called for higher taxes on millionaires, said it furthers economic inequality in a system that already favors the rich.

Cuomo called it a fair and practical step to help stimulate jobs in a tough economy. Most legislators praised tax cuts expected to reach 4.4 million middle-class New Yorkers.

"This was a function of an economic reality and deteriorating economic conditions," Cuomo said after the Senate's 55-0 approval Wednesday night. He said it should help stimulate jobs with some of the tax cuts and construction spending, while closing part of the projected $3.5 billion state budget deficit next year.

The Assembly voted 132-8 to pass it early Thursday. Speaker Sheldon Silver, a Manhattan Democrat, said they had faced unrelenting opposition in trying to extend the current tax rate on millionaires, and the bipartisan agreement was a big win for working New Yorkers. He said $690 million of tax relief over each of the next three will reach more than 99 percent or some 4.4 million tax filers.

Senate Majority Leader Dean Skelos, a Nassau County Republican, noted the middle-class tax cuts and said the bill eliminates the payroll tax that supports the Metropolitan Transportation Authority most small employers now paying it. He said major business groups supported the measure.

It also contains a public-private infrastructure repair fund, a tax break for manufacturers, and $50 million in aid to upstate communities trying to recover from historic flooding in the late summer. The funding is also expected to avoid another year of cuts to education and health care.

For income taxes, it lowers the rate for those earning $40,000 to $150,000 from 6.85 percent to 6.45 percent.

For those earning $150,000 to $300,000 it lowers the rate from 6.85 percent to 6.65 percent.

Higher earners would have otherwise seen their rates drop back to the permanent rate of 6.85 percent.

That will still happen for those earning $300,000 to $2 million and now paying surcharge rates from 7.85 to 8.97 percent.

Millionaires making more than $2 million yearly will see their surcharge rate of 8.97 percent slip to 8.82 percent.

Cuomo said he hopes to appoint a bipartisan commission to study the tax system, its fairness and ways to stimulate growth, and otherwise leave it alone next year.