Income Taxes for Wealthy May Increase in Albany Deal

Income Taxes for Wealthy May Increase in Albany Deal

Gov. Andrew M. Cuomo and legislative leaders, seeking ways to shore up a state budget strained by the weak economy, are ironing out the details of a deal that would raise income taxes on the wealthy and cut them for the middle class.

Top aides to the officeholders planned to meet through the weekend, as New York State lawmakers prepared to return to Albany next week for a special session of the Legislature that the governor appeared likely to call.

Members of the Democratic majority in the State Assembly were notified that they should be ready to return to the capital on Tuesday. Negotiations were still in the preliminary stages on Friday, and rank-and-file lawmakers had not yet been briefed on the discussions. But several people who were briefed said it was possible that a deal could be reached within days.

As of Friday, Mr. Cuomo and the legislative leaders had not yet agreed on the specifics of any agreement. But people briefed on their talks, who spoke on the condition of anonymity because the talks were private, said the leaders were discussing the creation of new tax brackets that would allow them to apply higher tax rates to the state’s top earners. The new brackets are likely to be temporary; their duration was still unclear on Friday.

Any deal that includes a tax increase would be a shift in Mr. Cuomo’s position. He ran for governor last year on a platform of opposing all tax increases, and he has refused pleas from fellow Democrats to support extending the state’s so-called millionaires’ tax past its scheduled expiration on Dec. 31.

But with the Occupy Wall Street movement drawing more attention to the issue of economic inequality and with the faltering economy widening next year’s projected state budget gap to as much as $3.5 billion, Mr. Cuomo refused for the first time this week to rule out seeking any increase in taxes in the coming year, and in recent weeks he has repeatedly expressed a desire to bring more “fairness” to the tax code.

The leaders were discussing establishing one or more new tax rates for the highest-earning New Yorkers, which would still be lower than their rate this year, when there is a temporary surcharge in place, but higher than it would have been if the surcharge were allowed to end. New rates could go into effect at the start of next year.

A portion of the revenue generated from high-income residents would be used to lower the tax rate for middle-income ones, which could make it easier for Mr. Cuomo to sell the deal to Republicans who have opposed tax increases.

“You have to give them the ability to say, ‘This was not a tax increase; this was a tax cut,’ ” one person briefed on the discussions said.

As is often the case with Albany deal-making, it remained possible that the negotiations would fall apart and that the governor would seek changes to the tax code in next year’s regular legislative session, which begins next month.

One major unresolved issue was how much extra revenue the state would seek to raise from the tax changes, which in turn would determine the tax rate for the new high-income tax brackets and the cut for middle-class earners.

A spokesman for Mr. Cuomo declined to comment on Friday. Michael Whyland, a spokesman for the Assembly speaker, Sheldon Silver, a Manhattan Democrat, said that Assembly Democrats were “committed to working with the governor to bring fairness to our tax code.” Scott Reif, a spokesman for the Senate majority leader, Dean G. Skelos, a Long Island Republican, said, “Our members believe that the governor’s economic program deserves a fair hearing, especially if he’s talking about Senate Republican priorities like cutting taxes and creating private sector jobs.”

Several Senate Republicans said this week that they were open to revising the tax brackets, but many are leery of any form of tax increase.

State Senator Carl L. Marcellino, a Long Island Republican, said he believed lawmakers should “seek out every other possibility that we can to reduce spending,” instead of raising taxes.

“If we raise taxes on the people who own businesses and who provide the jobs, more of them will leave,” Mr. Marcellino said.

Democrats are embracing the idea of a more-progressive state tax code. The Senate Democratic leader, John L. Sampson of Brooklyn, urged Mr. Cuomo on Friday to call the Legislature back.

“The state’s deficit has gotten worse, which demands immediate and dramatic action,” Mr. Sampson said.

Danny Hakim contributed reporting.