Albany, NY – Governor Mulls Tax Hikes for Rich, Cuts for Middle Class

Albany, NY – Gov. Andrew Cuomo, who promised to “freeze taxes” since his campaign a year ago, is now pushing a proposal that would revamp New York’s tax code and apparently increase taxes on the wealthy next year.

The plan would also cut taxes for the middle class as a response to indications of worsening national and state economies, while avoiding more cuts to education.

The Democrat released an opinion piece for newspapers Monday, building a case for revision of tax brackets and rules to make it “fairer” after decades of inaction. His proposal, major elements of which are still being negotiated with legislative leaders, drew immediate praise and rebuke.

“It is the end of the dominance of the anti-tax message politically,” said Richard Brodsky, a former assemblyman from Westchester who is now a senior fellow at the Wagner School at New York University. “It’s a master stroke from Cuomo in that he doesn’t just solve New York’s problems, he now gets into a national conversation about bipartisanship and fairness in the economy. …This will change national debate.”

Others saw a flip-flop.

“This is just painting a distorted picture of the current and past tax system in order to justify what he’s doing,” said E.J. McMahon of the fiscally conservative Manhattan Institute. “He wants to increase taxes for wealthier New Yorkers, so he is inventing this narrative.”

Last year, Cuomo’s campaign book called for a freeze on taxes “because New Yorkers – already among the most taxed in the nation – cannot afford to pay more taxes than they already do. Andrew Cuomo will freeze taxes: he will not raise and will veto any increase in personal or corporate income taxes or sales tax.”

Since then, Cuomo denounced an Assembly attempt in March to extend the current surcharge on New Yorkers making over $200,000 that is due to expire Dec. 31. He also has strongly opposed an Assembly proposal to create a new surcharge for the 2012-13 fiscal year for New Yorkers making over $1 million a year, saying it would drive employers out of state.

On Monday, however, Cuomo argued that a two-income family making $40,000 a year pays the same marginal income tax rate as someone making $20 million. That’s a contested point, but one that has been used by Democrats seeking a higher tax on wealthier New Yorkers to avoid further cuts to education and health care.

“It’s just not fair,” Cuomo wrote Monday. “While New York’s earned income tax credit, child care credit, and high standard deduction help working poor families, New York has left the middle class with an undue burden which also hinders economic recovery.”

“We need to put more money in New Yorkers’ pockets and inject it back into the economy,” Cuomo said. “To me, ‘fairness’ dictates that the more you make the more you pay and the higher your income the higher your rate.”

He proposed “multiple brackets and rates increasing on a graduated basis throughout and indexed for inflation” and “more income brackets for the middle income and high-end brackets,” meaning small increases in earnings could trigger higher tax liabilities.

Cuomo had made national headlines for his fiscal conservatism that addressed a $10 billion deficit and reduced spending in April without raising taxes. He did it with the help of the Senate Republicans’ slim majority.

The Republicans, who just as vociferously opposed any tax increases, wouldn’t comment on Cuomo’s proposal Monday. The Republican majority is now redrawing election district lines under the reapportionment required every 10 years which usually serves to protect the majorities. Cuomo has threatened to veto lines if he deems them to be partisan.

“It’s hard to judge the elements of this particular set of proposals when they aren’t in the context of the budget,” said Elizabeth Lynam of the independent Citizens Budget Commission.

Cuomo’s proposal is expected to be considered in a special session of the Legislature as early as this week, a holiday time when there’s traditionally little attention paid to Albany. Far more attention is on the budget process in the weeks leading up to the April 1 budget deadline.

“I guess the reapportionment pressure is great, so in short, what is the price tag?” asked Lynam. “It’s sort of taking it on faith that the governor will still be fiscally conservative when the Legislature gets its tax increase … the timing is a bit problematic.”

Cuomo had faced increasing pressure from his Democratic and progressive base, and at odds with the Occupy Wall Street movement that set up camp outside the Capitol. The Occupy Albany movement dubbed Cuomo “Gov. 1%” for protecting the rich, many of whom are his political donors.

“It seems blatantly obvious that Occupy Albany and the Occupy movement in general has had a profound impact on politics in New York state,” said Mark Mishler, 1 of the attorneys representing the Albany protesters.