Cuomo, leaders agree on new tax rates

ALBANY -- Gov. Andrew M. Cuomo and state legislative leaders agreed Tuesday to raise tax rates on the wealthy, reduce them for the middle class and partially roll back the MTA payroll tax.

The plan would raise rates for married couples with taxable income of more than $2 million annually and cut rates for couples earning between $40,000 and $300,000, Cuomo, Senate Majority Leader Dean Skelos (R-Rockville Centre) and Assembly Speaker Sheldon Silver (D-Manhattan) announced jointly.

More than 4 million New Yorkers would see their taxes cut, officials said.

The MTA tax rollback -- a hot-button issue on Long Island -- would eliminate the tax for all businesses with less than $1.25 million annual payroll and reduce it for those with $1.75 million or less. The reduction would affect more than 75 percent of the businesses that currently pay the tax, which helps fund the Metropolitan Transportation Authority.

All told, the package would net about $1.6 billion in revenue -- covering a chunk of the $3.5 billion budget shortfall New York faces by the end of this fiscal year. Rank-and-file legislators could begin taking up the package of bills in a special session as early as Wednesday.

In forging the deal, Cuomo reversed his previous opposition to raising tax rates on the wealthy in exchange for lowering rates for the middle-class -- the first time during his inaugural year in office the Democrat has had to change course on a high-profile issue.

It delivered a political victory to Silver, who had pressed the governor for months on the tax-rate issue. Skelos also secured political wins not only by getting tax cuts for the new middle-class brackets but also for the partial repeal of the MTA payroll tax, which was loathed by many small businesses.

"This is a victory for all New Yorkers," Silver said. "I think he [Cuomo] looked at the situation, felt that he could achieve a middle-income tax reduction and that that was important to New Yorkers and that's what we accomplished."

Skelos called it a "comprehensive plan . . . that will create thousands of new private-sector jobs and begin to turn our economy around."

Not everyone agreed.

"We're just doing this because Occupy Wall Street is making so much noise," said Assemb. Michael Fitzpatrick (R-St. James). "This is a tax increase, no ifs, ands or buts about it. The left wing of the Democratic Party is trying to exert its gravitational pull over the governor."

The deal also includes a commitment to eventually put a referendum before the public that would amend the state constitution to allow non-Indian-run casinos in the state. It also would create a youth jobs program, provide a fund for upstate flood relief and launch an infrastructure-construction project fund.

Earlier this year, the governor blocked Democrats' attempts to force the wealthy to pay higher tax rates, saying they would drive jobs out of New York. But this fall, as state revenue projections proved faulty and a $350 million budget shortfall developed, Cuomo changed his position.

Cuomo said the new bracket structure would make New York's tax codes fairer. "This would be the lowest tax rate for middle-class families in 58 years," he said in a statement.

The MTA tax was a key for Republican support. All told, the rollback is worth about $250 million to businesses that qualify. The MTA would be reimbursed by the tax hike on the wealthy.

"This is the selling point for me in the whole package," said Assemb. Dean Murray (R-East Patchogue), a fiscal conservative who typically opposes income-tax hikes. "The MTA tax is something that never should have been imposed in the first place. So we're righting a wrong. "

Business groups -- which backed Cuomo's stance earlier in the year in opposing higher taxes on the wealthy -- uniformly applauded the new tax agreement. Kevin Law, president and chief executive of the Long Island Association, said the package would "reduce taxes for the great majority of Long Islanders."

"It's a huge victory," added Sen. Lee Zeldin (R-Shirley). "It's a significant next step toward an eventual, total elimination" of the MTA tax.

Nassau County Executive Edward Mangano and Suffolk County Executive-elect Steve Bellone concurred. Bellone said the MTA rollback would "be a jolt to the local economies."

Democrats dismissed conservative legislators' concerns that the tax hike would push wealthy New Yorkers out of state. "I have no concern whatsoever that we are somehow going to be somehow driving the rich people away," said Assemb. Robert Sweeney (D-Lindenhurst). "I think they make their decisions where to live and do business on many factors and that's just one."

With Ted Phillips

and Paul LaRocco