"A year after enacting the largest increase in the state's personal income rate in generations, Albany is about to further raise taxes on wealthy New York City residents.
New York City's personal income tax rate for taxable income above $500,000 will grow by 6% under a plan advanced by lawmakers this week. The change, to take effect this year, would raise the city's top rate to 3.88% from 3.65%.
Combined with the state's income tax, higher-earners in New York City would pay a top rate of 12.85%, excluding federal taxes. New York City already has the highest combined local and state income tax rate in the nation.
State and city officials estimate that the increase would generate $100 million to $167 million a year in revenue for Albany. The hike is buried in a budget bill containing about $1 billion in taxes, fees, and other revenue changes.
The increase comes as a result of a plan to shave away some of the cost of the state's School Tax Relief program, the bulk of which pays for reductions in schools taxes paid by homeowners. A portion of the program also pays for a reduction in the city's personal income tax rate.
This year's state budget would eliminate that reduction for taxable income above $500,000, in effect, leading to a broad-based increase within New York City.
The increase comes on top of another soon-to-be approved plan in Albany to shrink in half the amount of charitable contributions that New Yorkers earning more than $10 million may deduct from their state taxes.
"It's here we go again. This is what happened last year. When the Legislature needs to be cutting spending, they're raising taxes," said Kenneth Adams, president of New York State Business Council, a business lobbying group based in Albany. "Their failure to bring spending under control leads to tax increases that stymie growth."
"Given that just one half of one percent of personal income tax filers in New York City pay half of the city's personal income taxes, Mayor [Michael] Bloomberg continues to be very concerned about any tax increases that could drive the people who pay for our police, fire, and other City services out of the five boroughs," said Stu Loeser, a spokesman for the mayor, in a statement.
A spokesman for Assembly Democrats declined to comment on the measure. Asked about the proposal, the Paterson administration also declined to comment.
Gov. David Paterson in January proposed a similar measure that would apply to taxable income above $250,000.
Last year, after a concerted lobbying effort by major labor unions and the Working Families Party, Albany raised the state's personal income tax rate by the largest percentage amount in nearly 50 years.
Individual filers earning between $200,000 and $500,000 and married couples with incomes totaling $300,000 to $500,000 now pay a top rate 7.85%, up from 6.85%. All filers with taxable income of more than $550,000 now pay a flat rate of 8.97%. They used to pay a flat rate of 6.85%.
Generating about $4 billion a year, the hike helped Albany to reduce deficits without imposing steeper cuts to public education and Medicaid. The increase, termed a "temporary surcharge," is scheduled to expire after 2011.
New York Attorney General Andrew Cuomo, a Democrat running for governor, and his Republican rival in the race, Rick Lazio, have said they would block any attempt to resurrect the tax after the sunset date."
