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Tax on rich contentious part of new state budget

Onasill ~ Bill Badzo

One of the chief arguments over the state budget will be whether to renew an income tax surcharge on New York’s wealthiest.

The state is facing a $3.5 billion deficit, and Gov. Andrew Cuomo wants to add a billion dollars to the state’s public schools. He also wants to offer free tuition at public colleges for families making less than $125,000 a year.

Cuomo said continuing the tax surcharge — known as the millionaires’ tax — is the simplest way to finance all that.

“Frankly, we don’t have the resources to lose the millionaires’ revenue now,” Cuomo said.

But not all lawmakers agree. Senate Leader John Flanagan, a Republican, said he’s opposed.

“I like cutting taxes,” Flanagan said.

The so-called millionaires’ tax was enacted in 2010, during a state fiscal crunch. It was supposed to be temporary but has been renewed twice.

Assembly Speaker Carl Heastie wants to take the tax on the rich even further.

“We still feel we want to go beyond that,” Heastie said. “We still believe there’s some back money that should be put toward education.”

Heastie would like to see a decade-old court order fulfilled. It said the state needs to spend billions more a year on public education. Cuomo does not think the court order applies to the entire state, but his budget office pointed out that school aid has been increased by $6.1 billion over the past six years.

Currently, the state’s top income tax bracket is for those making $1 million a year or more, and is set at 8.82 percent. It’s due to expire later this year if Cuomo and lawmakers don’t agree to renew it.

Heastie would like to see more tax brackets added, with a higher rate potentially for those making over $5 million a year, and an even higher rate for those making $10 million or more a year. He said if President Donald Trump and Congress follow through with plans to cut taxes on the rich, New York’s wealthy will have more left to pay higher state taxes.

“We want to add a couple more tiers,” Heastie said.

Cuomo is not likely in favor of expanding the millionaires’ tax, but he said if it is not renewed, lawmakers and the state will have to sacrifice some programs that they want, including a phase-in of a middle-class tax cut that was agreed to last year.

“If they don’t agree to the millionaires’ tax extension, then you can’t do a billion dollars in education spending, you can’t do a middle-class tax cut, you can’t do college affordability,” Cuomo said. “So that’s what they’re going to have to trade.”

In a sign that an agreement on the millionaires’ tax could come in the budget, Flanagan refused to rule it out completely.

“I think it’s too early in the game for me to just say, ‘This is a deal breaker,’ ” Flanagan said.

The budget hearings begin Jan. 24, and the millionaires’ tax and other proposals will get some closer scrutiny.

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. She has covered state government and politics for the network since 1990.