Gov. Andrew Cuomo and legislative leaders agreed Tuesday to income tax cuts for New Yorkers making $40,000 to $300,000, which will save most middle-class families $300 to $400 a year.
The tax cut of a fraction of 1 percentage point will be funded by an increase in the rate for taxpayers making more than $2 million a year. Those highest earners will pay an 8.2 percent rate, compared to the 6.85 percent rate they would have paid beginning Jan. 1 after a temporary surcharge expires on Dec. 31.
The deal still needs to be passed by the Senate and Assembly. It is expected to pass in a special session as early as Wednesday.
Cuomo had long rejected any tax increase, particularly Assembly Speaker Sheldon Silver's push to create a "millionaire tax" to avoid further cuts to education and health care spending. Cuomo had insisted a millionaire tax would drive employers to other states.
On Tuesday, Cuomo said the 4.4 million middle class taxpayers who will see cuts under the proposal will revive the economy with spending.
The high tax on top earners will also provide funding for job training of inner-city youths, economic development and $50 million for upstate towns hit hard by flooding during late summer tropical storms.
Under the new rates, individuals and families making $150,000 to $300,000 would pay 6.65 percent of their income in taxes and those making $40,000 to $150,000 would pay 6.45 percent. Without the proposed deal, both groups would have paid 6.85 percent next year.
Cuomo and legislative leaders said Tuesday that the agreement cuts or maintains all tax rates compared to the current tax code. But that ignores the surcharge on those making over $200,000 that is set to expire at the end of this year.
The deal doesn't mean the state is out of fiscal trouble. After paying for the middle class tax cut and for economic development and flood relief, the package will provide about $1.6 billion in revenue to address the growing deficit.
The state faces a current, unexpected deficit of $350 million this year and $3.5 billion for the 2012-13 fiscal year beginning April 1.
The new tax bracket structure, scheduled to expire Dec. 31, 2014, would be reorganized as follows, according to Cuomo's office:
Previous Tax Rate
New Tax Rate
$40,000 to $150,000
$150,000 to $300,000
$300,000 to $2 million
7.85% - 8.97%
Over $2 million
Cuomo said the new tax structure would generate $1.9 billion in additional revenue for the state.