New York City Top Earners Face Highest Income Tax in U.S. Under Cuomo Proposal

By Jimmy Vielkind

ALBANY, N.Y. -- New York Gov. Andrew Cuomo proposed raising the state's top income-tax rate by 2 percentage points, an increase that would mean New York City residents in the top bracket would pay the highest combined local tax rate in the country.

Mr. Cuomo, a Democrat, included the tax increase as part of a $193 billion budget for the fiscal year that starts on April 1. He said the increase would raise around $1.5 billion in tax revenue, and would be coupled with operating cuts to cover a projected $15 billion deficit in the current and coming fiscal years.

New York's top income-tax rate would rise to 10.82% from 8.82% under the proposal, state officials said. State officials said they would create five new tax brackets that would last for three years.

The new surcharge would apply to all New Yorkers whose returns report more than $5 million in income, and the top rate would apply to income over $100 million. Currently, single filers pay an 8.82% state tax rate on income over $1.08 million.

New York City's top income tax is 3.88%. That means some city residents could face a combined state and city income tax of 14.7% under Mr. Cuomo's proposal; California currently has the highest top income-tax rate, 13.3% on income over $1 million.

Mr. Cuomo said he was concerned his move would prompt high-income earners to leave the state, and said the tax proposal could be avoided if the federal government approved a large amount of aid to make up for revenue lost as a result of the coronavirus crisis.

"If the federal government doesn't fund state and local governments, it's going to hurt all New Yorkers," Mr. Cuomo said Tuesday. "The new government didn't cause the damage. But they are legally, ethically and politically responsible for correcting it."

The governor said he was seeking $15 billion in aid from Washington, which is the size of the state tax revenue shortfall his office attributes to the pandemic. Mr. Cuomo also said he would raise revenue by legalizing mobile sports betting and marijuana.

President-elect Joe Biden on Thursday proposed a $1.9 trillion coronavirus relief bill that sets aside $350 billion for state and local governments. U.S. Sen. Chuck Schumer (D., N.Y.), who is poised to become the chamber's majority leader, said in a statement he was pleased with Mr. Biden's proposal.

Robert Mujica, Mr. Cuomo's budget director, said the state has saved $6 billion in the current fiscal year by holding back part of its planned payments to schools, local governments and social-services providers. The delays could become permanent cuts. The state has also saved $215 million by deferring pay increases for state workers that had been scheduled to take effect in April, Mr. Mujica said.

Write to Jimmy Vielkind at [e-mail]

(END) Dow Jones Newswires

01-19-21 1620ET