State eyes tax hike for high earners

A new, higher state income-tax rate would apply to New Yorkers earning $2 million or more annually under a plan that Gov. Andrew M. Cuomo and state lawmakers are discussing.

A partial rollback of the controversial Metropolitan Transportation Authority payroll tax is also on the table, as Newsday reported Sunday, as Cuomo and lawmakers prepare for a possible special legislative session as early as Wednesday, officials said Monday.

Citing the stalled economy, Cuomo is pushing lawmakers to convene to consider a range of ideas on taxes and jobs. Among the items under discussion are tax hikes for the wealthy, tax cuts for some middle- and lower-income earners, and a jobs program for urban youth.

Multiple legislative sources said that, according to one scenario under discussion, Cuomo could propose that the highest tax rate kick in at annual incomes of $2 million or more. The rate could be as high as 8.97 percent. Tax rates for incomes of $125,000 or lower could be dropped below 6.85 percent.

The Cuomo administration declined to provide details Monday, citing ongoing negotiations with the Senate and Assembly.

Earlier this year, Cuomo and Republicans blocked an attempt to reduce an 8.97 percent state surcharge that applies to individuals earning more than $200,000 annually, and joint filers making more than $300,000 -- which some have dubbed a "millionaires' tax." With the expiration of the surcharge on Dec. 31, a single person with a taxable income of $20,001 and above would pay a rate of 6.85 percent; a couple filing jointly would pay that rate at an income of $40,001 and above.

Cuomo said the wealthy should pay a higher rate.

"Simply put, to me 'fairness' dictates that the more you make, the more you pay, and the higher your income, the higher your rate," Cuomo wrote in an opinion article sent to newspapers statewide. "I would create multiple [tax] brackets for the middle income and add high-end brackets. The actual rate should be several points from low to high."

A number Republican senators have said they'd consider such a rewrite, even though the state Conservative Party has urged them not to.

Also at stake is a partial repeal of the MTA tax. That could be key to winning Republican support for taxing the wealthy.

"This is something that would be very important to me and my colleagues on Long Island," Sen. John Flanagan (R-East Northport) said of the possible MTA rollback, though he emphasized that he couldn't weigh in on a tax code proposal the governor has yet to unveil.

"I'm excited that it's on the table," added Sen. Lee Zeldin (R-Shirley), who also said he didn't like the idea of higher tax rates for some.

Edmund J. McMahon, senior fellow at the Empire Center, a conservative think tank, said an income tax hike would hurt the state's economy.

"It would be a bad trade off," McMahon said. "A marginal income-tax rate hike is more damaging to that region than the MTA payroll tax."

McMahon also blasted the secrecy surrounding the potential special session. "The problem with talking about any of this is we don't know what they're proposing," he said. "They're being secretive about it, and so they have everybody at a disadvantage because they won't explain what they're considering."

With Ted Phillips