Cuomo Pushes New Tax Rates for Big Earners

Thomas Kaplan|The New York Times

Gov. Andrew M. Cuomo on Sunday called for “comprehensive reform” of New York’s tax code that would mean higher tax rates for the wealthy and a tax cut for the middle class, according to officials briefed on the plan.

Andrew Cuomo
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Mr. Cuomo, a Democrat whose popularity soared as he cut spending and won concessions from labor unions during his first year in office, also called for a stimulus package that would increase spending on road and bridge construction; finance new programs to train poor urban youths; and legalize resort-style casino gambling.

Mr. Cuomo was expected to call lawmakers back to Albany as soon as this week to take up some of his proposals.

While Mr. Cuomo did not provide specifics on his income tax proposals, he and legislative leaders were negotiating a deal, the officials briefed on the plan said, that would allow the state’s so-called millionaires’ tax — a surcharge on incomes over $200,000 for individuals — to lapse as scheduled on Dec. 31.

But one or more new tax brackets for high-income earners would have those individuals paying less than they did under the surcharge — allowing officials to say that the millionaires’ tax had lapsed — but paying at a higher rate than they would have been under existing tax brackets. The proposal would also lower the tax rate for middle-income earners and might include tax incentives for businesses. It was not clear on Sunday what the income thresholds would be.

The officials, speaking on the condition of anonymity because the talks were private, said that if agreed upon, the new rates would last for several years; a commission would be created to come up with permanent new rates and to address tax loopholes and changes to business taxes.

Mr. Cuomo made his call for a tax overhaul and stimulus proposals in an essay his office sent to reporters on Sunday. “Our goal in New York should be twofold: to fashion a job-creating economic plan, and to defy political gridlock like we see in Washington and make government work to actually implement the plan,” Mr. Cuomo wrote.

Any move to raise tax rates for some and increase spending would be a risky step for Mr. Cuomo, who vowed during his election campaign last year to oppose tax increases.

But in Albany, he appears to have the ear, if not yet the full support, of many Republican lawmakers and business leaders, who say the governor has demonstrated his sensitivity to New York’s long history of high taxation and free spending. Democrats, emboldened by the Occupy Wall Street movement, are eager for the governor to push a more progressive tax system and a more aggressive job-creation program.

The Legislature had not been scheduled to return to Albany until January, but Mr. Cuomo began considering swifter action as the state’s weak economy caused tax collections to grow less rapidly than expected, causing an estimated $350 million shortfall in this year’s state budget and a projected shortfall of up to $3.5 billion next year.

Mr. Cuomo has also been seeking to mollify his critics in the Democratic Party and labor unions who have been pressuring him to renew the millionaires’ tax or find another way to increase revenue collected from the state’s wealthiest residents.

The deal under consideration could both placate liberals and allow Mr. Cuomo to say he stayed true to his promise on the millionaires’ tax.

Mr. Cuomo began his first term by laying out an economic agenda that would limit taxes and spending. He campaigned on a promise of not raising taxes — “I say no new taxes, period,” he declared on the day of his inauguration — and he repeated that message many times this year. At times, Mr. Cuomo found himself more closely aligned with Republicans than Democrats.

Liberals have responded enthusiastically to Mr. Cuomo’s interest in a more progressive tax code, in which higher-income New Yorkers would be taxed at higher rates.

“Unemployment is painful to individuals and destructive to society, and the governor, the speaker and the majority leader have a chance to demonstrate that the 1 percent do not control politics in New York,” said Dan Cantor, the executive director of the Working Families Party. “Asking the rich to do their share is not unreasonable in the slightest, and spending that revenue on job creation is good policy and good politics, and the governor is correct to make this move.”

Business leaders in recent days have signaled an openness to Mr. Cuomo’s tax code revisions, even if they would raise taxes on some people.

Kathryn S. Wylde, the president of the Partnership for New York City, a network of business leaders, said that Mr. Cuomo was “appropriately changing the terms of debate from the class warfare language of the millionaires’ tax advocates to focus on tax reform that promotes universal fairness.”

“He knows it is possible to raise revenues without inflammatory rhetoric that drives business and wealth out of the state,” Ms. Wylde said. She added that because lawmakers had moved this year “in the direction of showing they could exercise some discipline over spending,” the business community would support a “balanced approach” of spending cuts and new revenues as Mr. Cuomo drew up his next budget.

Anticipating the possible special session, the Democratic majority in the State Assembly has summoned its members to the Capitol for Tuesday, and the Republican majority in the Senate said it would assemble its members on Wednesday.

A spokesman for Mr. Cuomo, Josh Vlasto, confirmed that negotiations were under way with legislative leaders on a number of issues, including what to do about the state’s budget gap, as well as a much-contested proposal to legalize the hailing of livery cabs on most New York City streets.

Some of the other changes will take time to implement: legalizing full-scale commercial casinos would require amending the state’s Constitution, a process that would require approval from two consecutive Legislatures and then a voter referendum. (Mr. Cuomo said he wanted to create “destination gaming locations,” which he said would “promote job creation and recapture revenue that is currently being lost to other states.”)

A spokesman for the Senate Republicans, Scott Reif, said lawmakers this week planned to “discuss a number of issues, including our commitment to cutting taxes to create new private-sector jobs.” A spokesman for the Assembly speaker, Sheldon Silver, a Manhattan Democrat, declined to comment.