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N.Y.’s Millionaires Face Tax Hikes in Proposed Budget

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What You Need to Know

  • The richest New York City residents would pay the highest combined state and city tax rates in the U.S., surpassing California.
  • Under the proposed plan, income between $5 million and $25 million would be taxed at 10.3%.
  • Also, income over $25 million would be taxed at 10.9%

New York Governor Andrew Cuomo and state lawmakers have reached a tentative agreement to raise taxes on the wealthiest New Yorkers as part of a roughly $200 billion state budget deal expected to be announced as early as Monday, according to a person familiar with the negotiations.

The richest New York City residents would pay the highest combined state and city tax rates in the U.S., surpassing California, and income-tax rates would temporarily increase to 9.65% from 8.82% for single filers earning more than $1 million, according to the person, who wasn’t authorized to speak publicly because a final budget hasn’t been reached.

The agreement would also create two new tax brackets. Under the proposed plan, income between $5 million and $25 million would be taxed at 10.3% and income over $25 million would be taxed at 10.9%. The new rates would expire in 2027 under the proposed plan.

Lawmakers were nearing a budget agreement that would increase corporate and income taxes by $4.3 billion a year with additional revenue going to fund aid for schools, undocumented immigrants and small businesses, the Wall Street Journal reported Sunday, citing unnamed sources.

The Cuomo administration and legislative leaders didn’t immediately respond to requests for comment.

Taxes have been one of the largest points of contention between the governor and the legislature. In his January budget proposal, Cuomo called for a $1.5 billion income tax increase.

But that was before the state knew how much money it would receive from a federal aid package. New York will receive only $12.6 billion of the $15 billion in federal aid it sought, leaving a hole of nearly $2.5 billion, budget director Robert Mujica said last week.

Leaders of the Senate and Assembly each discussed raising nearly $7 billion of revenue, which included proposals to increase income, estate and corporate taxes. The proposals include a 1% surcharge on capital gains income, a pied-a-terre levy and lifting the estate tax.

Big Apple Residents Face Bigger Taxes

Business leaders have lobbied the Cuomo administration and state lawmakers to resist raising taxes, arguing tax increases now would drive high earners out of the state — and especially New York City — while the economy struggles to recover from the pandemic.

Under the proposed tax deal, income taxes for New York City residents earning more than $1 million would be between 13.5% and 14.8%. That compares to 13.3% on income over $1 million in California, currently the highest in the nation, according to the Tax Foundation.

The plan includes $500 million in property tax relief intended for about 1.3 million New Yorkers who earn less than $250,000 a year, the person said.

The proposed deal leaves in place prior middle-class tax cuts enacted in 2016, the person said.

The personal income tax rate is set to drop in the 2021 tax year to 5.97% from 6.09% for individuals earning between $40,000 and $150,000 a year, and to 6.33% from 6.41% for people earning $150,000 to $300,000 a year.

If a state budget isn’t adopted on Monday, or there isn’t an emergency appropriation passed, the paychecks of thousands of state workers, including health care and correctional facilities employees, could be delayed, New York State Comptroller Thomas DiNapoli said Friday.

(Image: Bloomberg)

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