New York Income Tax Rise Hinted as Budget Gap Grows (Update1)
Michael Quint
The newly estimated gap for the year beginning April 1 was 25 percent more than projections six weeks ago, he said.
“We are right now on the verge of cuts and service reductions that I would have to describe as life threatening,” Paterson said. “With situations like that, everything is on the table,” he said in response to a question about increasing the state’s income tax for high earners.
Paterson and legislative leaders said earlier this week that the deficit continues growing because of falling tax collections in a shrinking economy with rising unemployment. If next year’s deficit exceeds the $16.2 billion estimate, the spending plan would be amended, as lawmakers did twice in the current year.
The state Labor Department said yesterday that New York’s unemployment rate rose by a record 0.7 percentage point in February to 7.7 percent, the highest since 1993. In New York City, the jobless rate rose 1.2 percentage points to 8.1 percent in February.
Paterson said he continues to press leaders of the Senate and Assembly for spending cuts in addition to the “record” cuts already agreed upon. He didn’t identify the kind or amount of the reductions.
Near-term Action
Lawmakers expect agreements on parts of the budget soon enough for bills to be printed this weekend and ready for voting before the midnight, March 31 deadline, said Austin Shafran, a spokesman for Senate Majority Leader Malcolm Smith.
On March 24, Paterson said he may have to drop 8,900 jobs from a state payroll estimated at 199,400, after unions rejected his proposal to eliminate a previously negotiated 3 percent pay increase. The budget presented by Paterson in December totaled $120.1 billion, including federal assistance and capital spending.
Labor unions and advocates for education spending have urged lawmakers to increasing income taxes as a way to avoid cutting jobs or state aid to local schools.
Republicans, who are a minority in the Assembly and Senate, oppose raising income-tax rates.
‘Last Resort’
Paterson previously said tax increases would hurt the state’s economy and should be a “last resort” to balance the budget.
“We want to be sure we are cutting enough spending” before negotiating a tax rise, he said at the press conference.
There has been no agreement on higher taxes, Paterson said, before ending the news conference to start closed-door negotiations with Smith and Assembly Speaker Sheldon Silver. The three are New York City Democrats.
The Assembly approved an increase on those earning $1 million or more earlier this year that the Senate didn’t consider. Lawmakers in both chambers have proposed various plans to increase tax rates for households with incomes as low as $250,000. The state’s current maximum rate of 6.85 percent applies to those with incomes exceeding $40,000.
To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.
Last Updated: March 27, 2009 15:53 EDT