Gyory: Inside the Albany deal on taxes

Bruce N. Gyory is a political consultant with Corning Place Communications and an adjunct professor of political science at the University at Albany.

The tax reform and economic development package agreed to in Albany this week provides a textbook case for assessing how effective bipartisan leadership can overcome dysfunction. It's worth pulling back the curtain to analyze the political architecture employed by Gov. Andrew M. Cuomo.

First, the need for the deal was driven by declining revenues that would create a deficit of $3.5 billion for the next fiscal year. How could the governor keep the implicit pledge in the fiscal plan with the legislature to increase spending on education and health care by 4 percent, while holding overall spending growth to 2 percent, and maintain his insistence not to raise taxes?

The governor found the political sweet spot by raising revenue from the wealthy (though still leaving this group slightly better off than under the current tax surcharge, which is set to expire at the end of the month), while cutting taxes for the middle class.

The governor's political read was perfect. He took advantage of the energy the Occupy Wall Street protests have created not only on the left, but among moderate independents.

National retail sales statistics have shown that there is a demand problem in the middle class. High-end stores like Neiman Marcus haven't had to offer discounts to maintain or increase sales, but blue-collar and middle-class bastions like Target have been offering discounts to attract shoppers. Since 70 percent of our gross domestic product is driven by consumer spending, the best economic tool in New York's box was to put money into the hands of the broad middle class.

Polling backs this up. October's Siena Research Institute poll showed 51 percent of New York voters preferred to close the deficit by cutting spending, but voters also, by 72 percent to 26 percent, backed a tax hike for those earning more than $1 million a year. The governor's package melded both, closing about half of the deficit with taxes, while proposing in effect to close the rest of the deficit with cuts.

A recent Hofstra University poll of suburban voters nationwide shows how deep approval is for taxing wealthy people more. Some 97 percent of suburbanites supported increasing the taxes of those earning more than $1 million a year. Today voters -- particularly those in the suburbs -- want the tax code to start nurturing the middle class.

Still, the governor had to assemble a package that could command broad legislative support. Provisions were added to generate a robust infrastructure fund, tax credits for businesses hiring low-income youth, a reduced manufacturing-tax rebate, relief for flood victims so critical for many upstate counties, and a partial rollback of the Metropolitan Transportation Authority payroll tax -- music to Long Island's ears.

With something for everyone, it's not surprising that the overall package met with strong support in the Assembly, where it passed 132-8 in the Democratically controlled chamber, as well as in the more evenly divided State Senate, where it passed unanimously. Representatives of business and labor also supported the package. To be fair, this package has opponents on the left -- such as New Yorkers for Fiscal Fairness, who wanted a revenue package at least twice the size, hitting the higher brackets even harder -- and on the right -- such as New Yorkers for Growth, who wanted no additional revenue at all and the high-income surcharge to expire. Yet, to end dysfunction, bipartisan packages must cultivate the vital center of our political spectrum.

The governor didn't do this alone. Assembly Speaker Sheldon Silver (D-Manhattan) and Senate Majority Leader Dean Skelos (R-Rockville Centre) deserve credit for forging a bipartisan consensus behind this package. Assembly Democrats didn't hold out for more revenue. Senate Republicans came to the middle, providing a vivid contrast to the obstinate approach of congressional Republicans in Washington.

Our leaders in Albany have passed the political test. But the more important test is whether this package will close the deficit while improving the purchasing power of the middle class, facilitating job development and generating overall economic growth for New York State.