NY lawmakers near deal to raise taxes on wealthy, boost school aid by $1B or more
Under the tentative New York State budget deal, tax rates would be raised for households earning $2 million or more annually. Credit: Newsday/J. Conrad Williams Jr.
ALBANY — New York lawmakers are nearing a budget deal that would significantly hike income tax rates on high earners and corporations, boost school aid by more than $1 billion and set aside money for businesses to recover from the pandemic, sources said Sunday.
The provisions would be part of a roughly $200 billion state budget the Senate and Assembly could vote on in the coming days. The budget was due April 1, but lawmakers continued talks past the deadline.
Under terms being finalized, the budget deal also could include a $1.4 billion state aid increase in "foundation aid," the primary funding stream for school districts in the state, and earmark $120 million for prekindergarten expansion. It would create a modest new property-tax credit for households earning less than $250,000 annually with a maximum benefit of $350 and freeze public university tuition rather than a $200 increase as Gov. Andrew M. Cuomo originally proposed.
It also would include an agreement to put a multibillion-dollar environmental bond act to a statewide referendum — but not until 2022.
Not all the details of the budget framework had been finalized Sunday, sources said, but it would include a $2 billion fund for immigrants in the country illegally who lost jobs during the pandemic but were ineligible for unemployment. A two-tiered system would be created; those who could document their job loss would receive a greater benefit. Also, it would create a new fund of grants and rent relief for small businesses.
Expansion of gambling to allow mobile sports betting is likely, though officials haven’t agreed on terms, the sources said. Also still unsettled is a proposal to accelerate the time table for allowing downstate casinos.
Under the tentative budget deal, New York would raise its highest tax rates above the current 8.82% for the top bracket. Rates for households making $2 million or more annually would rise to 9.65%; for $5 million or more, 10.3%; and for $25 million or more, 10.9%.
Corporate taxes would rise by three-fourths of percentage point to 7.25%.
But the lawmakers would discard proposals to also raise taxes on capital gains and estates.
Income tax rates were perhaps the sharpest area of disagreement among Cuomo, a Democrat, and the Democratic-controlled Senate and Assembly.
The state recently received $12.6 billion in the latest federal stimulus package — enough to not only wipe out New York’s budget deficit but also eliminate the need for tax hikes, business groups and fiscal hawks said.
The governor, before the federal stimulus, proposed a tax hike only for those earning $5 million or more annually. He said it would generate $1.5 billion a year for the state. And he warned, as did business groups, that bigger tax hikes would chase businesses and the wealthy away from New York.
But the Legislature, moving in a more progressive direction than the governor on a variety of issues in recent years, wanted higher rates for a variety of brackets. For example, the Assembly wanted those earning $25 million or more to pay a rate of 11.85 %.
If the terms being discussed are finalized, the Legislature will have gotten the new income-tax brackets it wanted, albeit at lower rates than it called for earlier this year.
Sources said the budget also would create a "circuit breaker" to provide homeowner tax credits. It would kick in if a household’s property-tax liability is greater than 6% of its income — think $100,000 adjusted gross income and a $6,000 or greater property-tax bill; or $150,000 income and a $9,000 property-tax bill.
But the credit wouldn’t be available to households with more than $250,000 annual income.
The environmental bond act has been floated for years. Cuomo and legislators wanted to put it before voters last year, but shelved it after the COVID-19 pandemic hit. Legislators revived the issue this year, while debating whether to put it on the ballot this fall or next.
The bond act is intended to allow the state to borrow money to fund projects to protect and clean water supplies on Long Island and elsewhere, as well as other undertake other environmental cleanups.
