Monday, December 12, 2011

Cuomo Achieves Bipartisan Tax Deal

New York State Governor Andrew Cuomo successfully pushed through a measure to prevent the expiration of the so-called "millionaire's tax" as he seeks to reduce future budget deficits.

Millionaire's Tax?

In 2009, prior to Governor Cuomo's election to his current post, the New York State Legislature adopted higher taxes on “high earners” ($200,000+) in the form of a temporary surcharge that applied only to high earnings.The net effect of the surcharge was an increase of more than 30% in the highest effective rate for personal income taxes. The tax was due to expire at the end of 2011.

The surcharge was called a "millionaire's tax" despite the fact that more than three-quarters of those paying the tax were earning less than $1 million per year.

Many have argued that the "millionaire's tax" reduces economic growth, penalizes small businesses, and does not create enough tax revenue to make up for the economic burden it imposes.

Others have argued that in an era of huge budget deficits, we need to require the highest earners to pay higher taxes in order to avoid raising taxes on those with modest incomes.

With a $3.5 billion deficit looming for next fiscal year, Cuomo sought (and obtained) an extension of the tax surcharge.

Tax Increase or Tax Reduction

The extension was accompanied by other tax changes, and those changes raise questions about whether we should view the recently adopted tax changes as a tax increase or a tax reduction for high earners as well as for every level of earner in NYC.

Opponents of the tax surcharge see it as a tax increase. The tax surcharge would have expired at the end of 2011, and therefore, its extension is an increase in tax rates for high earners versus what those high earners would have paid without an extension.

Supporters of the surcharge see it as a tax reduction. Because of the changes in the tax rules that accompany the extension of the surcharge, every level of earner who pays New York State personal income tax will experience a reduction in tax liability in 2012 versus what was in place in 2011. 

Cuomo 2016
The tax deal that Cuomo engineered in New York State by achieving virtually unanimous support from the Republicans and Democrats in the State Legislature, Cuomo establishes himself as one of our country's few bi-partisan leaders and links his name to one of very few bi-partisan success stories.

Cuomo contrasted his Albany achievement with the gridlock and failure in Washington DC in his video explaining the tax deal. He now starts to look like a potential top-tier candidate for the Democratic nomination in 2016. If he can win a second landslide in 2014 and maintain his streak of bipartisan successes, Andrew Cuomo will emerge as an obvious contender for the top of the national ticket in 2016.

Cuomo has not proven that he can win the enthusiasm of African Americans, but he has proven that he can lead a large state, earn the support of Republicans and Democrats, and speak directly to the voting public with great effect.

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