Coalition Calls on Governor, Legislature to Close Corporate Tax Loopholes & Level Playing Field for Small Business

Groups Release List of Corporate Tax Dodgers

Albany, NY — A large coalition of community, labor, student, faith and Occupy organizations gathered on Monday to announce their campaign to bring fairness and transparency to New York’s corporate tax system. The organizations, who last year worked together on the “Millionaires Tax” and personal income tax reform, are calling on Governor Cuomo and the Legislature to close corporate tax loopholes, raising over $1 billion dollars for this year’s state budget. The additional revenue will help New York to create jobs, create a fairer environment for small business, and prevent more devastating budget cuts to services and our safety net and allow for restorations of reduced funding.

The groups released a list of some of New York’s worst corporate tax dodgers, including Travelers Insurance, American Express, Verizon, and Goldman Sachs. The list highlights the gross inequities in our tax system that hinder small businesses, job creation, and our economy.

“Last year, Governor Cuomo and the Legislature worked together to make simple, clear changes to the personal income tax code that made it more fair and raised more revenue, while asking a new Tax Reform and Fairness Commission to work on long-term changes. This year, they should do the exact same thing for corporate taxes,” said Michael Kink, Executive Director of the Strong Economy for All Coalition. “Our recommendations provide a roadmap for reform: strong enforcement, real fairness, and new transparency so the public can know what’s going on. We’d raise over a billion dollars for this year’s budget and eliminate the absurd situation where bodegas and car repair shops are paying a higher rate in corporate taxes than Goldman Sachs or Verizon.”

“The fight for tax fairness is just getting started,” according to Ron Deutsch, Executive Director of New Yorkers for Fiscal Fairness and coordinator of the GrowingTogetherNY coalition. “Once again all of the coalitions that worked together last year will be coming together to ensure that enforcement, fairness and transparency are part of or corporate tax code and that we restore a fair and level playing field for small businesses in NYS.”

The plan to reform New York’s corporate tax structure released today focused on three main principles: enforcement, fairness, and transparency. The points of the plan include:
• Requiring real estate partnerships to pay the taxes they owe
• Reforming New York’s Corporate Alternate Minimum Tax
• Taxing nonresident hedge fund management fees
• Eliminating the Carried Interest Exemption under New York City’s Unincorporated Business tax
• Cracking down on schemes that create “nowhere income”
• Requiring public disclosure of corporate tax payments for publicly-traded companies

“New York State’s corporate income taxes have become more and more like Swiss cheese as more and more tax breaks have been added to the tax code in the name of economic development,” said Frank Mauro, Executive Director of the Fiscal Policy Institute. “Ironically, beginning in 1994, more tax breaks have been added to the state’s corporate Alternate Minimum Tax, which was established in 1987 to ensure that profitable corporations made at least some contribution to the cost of government services. The result of these developments is that general business corporations have gone from carrying 9.6% of New York State’s tax load in the 1970s to 4.3% last year.”

‘New York State should repeal or reform corporate tax breaks that are not creating jobs and not allow tax breaks in the calculation of corporations’ Alternate Minimum Tax obligations,” Mauro added.

The Swiss cheese nature of New York State’s corporate income taxes are also demonstrated by the most recent data on state and local government finances from the U.S. Bureau of the Census. The Census Bureau tabulations show that in 2008-09, New York City’s corporate income tax collections were actually greater than New York State’s ($6.03 billion vs. $4.43 billion). And, the collections attributed to the state include the proceeds from the 17 percent surcharge on the portion of corporations’ tax liabilities attributable to activities in the Metropolitan Transportation Authority service area.

“The human services sector appreciates the move toward more fair income and corporate tax systems and continued progress should generate enough revenue to maintain services for New Yorkers struggling to make ends meet. Not only do human services play a critical role in supporting families and removing barriers to work, they also employ 1.25 million throughout the state and purchase over $1 billion in goods and services.” Michael Stoller, Executive Director, Human Services Council.

“Because of our unfair corporate tax structure, New York’s economy continues to be held back,” said Ivette Alfonso, President of Citizen Action of New York. “The need for these reforms is yet another example of the massive influence that big CEO campaign contributors have in our Capitol. We need a tax code set up by, and set up for the 99%.”

“In schools across the state students have sacrificed college prep courses, reading tutors, arts, sports, music and thousands of teachers,” said Billy Easton, Executive Director of the Alliance for Quality Education, “meanwhile we are giving sweetheart tax deals to insurance companies, credit card companies and investment bankers. It’s just wrong.”

Mario Cilento, President of the NYS AFL-CIO, said, “Throughout this budget crisis working men and women have been asked to bear the entire brunt of cost cutting through new pension tiers, higher health premiums and wage freezes. At the same time many corporations fail to even pay the taxes they owe. We need to close corporate tax loopholes to infuse reoccurring revenue and end the vicious cycle of cuts to middle class families.”

“Accountability is a two-way street. It isn’t just for schools,” said NYSUT Executive Vice President Andrew Pallotta. “As New York grows its economy and creates jobs — a goal we all share — we need business to be accountable, too, and pay its fair share to help pay for the strong schools and colleges; safe bridges and roads; and other vital services that New Yorkers need.”

“Governor Cuomo and the legislature took action to make personal income tax rates more fair,” said Michael Mulgrew, President of the United Federation of Teachers. “Similar action is needed on corporate tax reform. By eliminating the most glaring corporate tax loopholes New Yorkers would save millions more.”

“It is outrageous that hard working PEF members pay the same or higher tax rate than New York companies that make up to $33 billion in profits a year. Its particularly insulting that middle class families are paying the same tax rate as Rupert Murdoch’s News Corporation,” said Ken Brynien, President of the New York State Public Employees Federation (PEF).

“These are the sweetest tax loopholes for Wall Street’s wealthiest hedge fund managers,” said Walter Lipscomb, a board member of Community Voices Heard from Yonkers, “but are just bitter for the working families forced to carry them. Wall Street’s wealthiest need to pay their fair share.”

“Students across New York are being asked to pay more for access to New York’s public higher education system, which erodes in quality every year because of massive budget cuts,” said Angelica Clarke, and organizer with New York Students Rising and Save Our SUNY. “As students, we demand Governor Cuomo and the legislature initiate a tuition freeze to alleviate some of the burden caused by his regressive tax on students instead of expanding NYSUNY 2020 which allows corporations to continue to take advantage of our public institutions through unequal public-private partnerships. A tuition freeze would provide temporarily relief to working students and families and will be an important first step in protecting access to New York’s public universities and colleges. If Governor Cuomo truly wants to work in the interest of students, he must join New York Students Rising in our efforts to repeal NYSUNY 2020 and fully fund CUNY and SUNY.”

“In New York we have record homelessness – over 45,000 men, women and children spent last night in New York City shelters or sleeping rough on the streets – at a government cost of over $1 Billion per year. And yet there is no plan to address this crisis that brings over 110,000 different men, women and children (40,000 of them) into city shelters each year. The front line services provided by Coalition for the Homeless to prevent and resolve homelessness have suffered years worth of deep cuts – a million dollars per year in lost services and jobs just for our own organization. The Coalition supports efforts to close corporate tax loopholes to help avoid further cuts and secure the resources we need to we need to rebuild these vital services and reverse course,” said Shelly Nortz, Deputy Executive Director for Policy with Coalition for the Homeless.

“The fact that all too often powerful corporations are able to wield political influence to create tax loopholes to avoid paying their fair-share is a paradigmatic example of the broader economic and political inequalities that have motivated the Occupy movement,” said Colin Donnaruma of Occupy Albany. “Occupy Albany enthusiastically joins in the efforts to close these loopholes in New York and generate much needed revenue for the 99%.”

“All New Yorkers should pay their fair share, including corporations that benefit greatly from our state’s people and infrastructure,” said Sunshine Ludder, the senior economic policy strategist at the Center for Working Families. “It’s essential for a strong democracy and economy.”

“Religious communities are called to feed the hungry, shelter the homeless, and clothe those who would go cold,” said Sara Niccoli, Co-Director, Labor-Religion Coalition of New York State. “However, when the richest New Yorkers continue to enjoy unthinkable wealth as the lines for our faith-based feeding programs and shelters just grow longer – it’s time to call for fundamental change. it’s time for corporations to pay their fair share. We remind our state government: “No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.” Matthew 6:24.

Statement of PEF President Ken Brynien on tax rate reform

Albany – We applaud the Governor’s and Legislature’s effort to address the growing income inequality in New York. The agreement announced today on tax reform is a step in the right direction but unfortunately falls short in obtaining the goal of a fair tax system.

The agreement would give millionaires the largest tax cut at more than 2 percent while the middle class would get the smallest tax cut at less than half a percent.

Tax rate reform should include tax cuts for the middle class, but we support higher tax rates for New York’s wealthiest as proposed in the “Tax the 1 percent” plan developed by the Fiscal Policy Institute. This plan would raise the tax rate for the wealthiest New Yorkers and generate between $4.4 billion and $5.1 billion in annual revenue.

We are urging lawmakers to adopt a true tax reform plan that addresses the basic unfairness in our tax system while raising the necessary revenue needed to provide important services including health care, education, environmental, mental health and human services as well as necessary infrastructure improvements.

PEF is the state’s second-largest state-employee union representing 55,000 professional, scientific and technical (PS&T) employees and other public and private employees.

BALCONY APPLAUDS PROGRESS ON NEW YORK STATE FAIR TAXATION

BALCONY APPLAUDS PROGRESS ON NEW YORK STATE FAIR TAXATION

For Release Tuesday December 6th

BALCONY, the Business and Labor Coalition of New York, today (Tuesday) commended the New York State Legislature and Governor Andrew Cuomo for reaching an agreement on a fair tax code reform for New York State. BALCONY urged immediate passage by the New York State Assembly and Senate.

The new plan provides the shared sacrifice by all New Yorkers in order to rebuild the New York economy for businesses, workers, seniors and children.

BALCONY agrees with Governor Cuomo that New York State is in a dire fiscal situation and that we must address an immediate revenue shortfall of at least $350 million and a $3-$5 billion revenue shortfall next year.

The business and labor representatives of BALCONY supported the New York State surcharge on higher income New Yorkers in 2009. At the same time, since our inception BALCONY has supported a more progressive tax system for New York and we are pleased to see the Governor and Legislature move decisively in that direction.

The new tax reform code will spur economic growth by both individuals and corporations. Lowering taxes on small businesses and moderate income families will help stimulate economic activity and spending.

The urgency to reform the tax code is made even more necessary due to the failure of the Congressional “Super Committee” to reach a consensus on tax policy. Washington’s gridlock could cost New York State more than $5 billion in Federal funding over the next ten years. A more progressive tax system in New York State will help fill the gap in the loss of those federal funds. We need strong business so that New Yorkers can keep their jobs and be provided with the vital services which our residents need.

We urge all parties in New York State to enact the comprehensive tax package that will benefit all New Yorkers.

BALCONY is co-chaired by Alan Lubin, the former NYSUT Executive Vice President and Bruce Ventimiglia, Chairman of Saratoga Capital Management.

BALCONY represents more than 1000 New York State Business, labor unions, non profit advocacy organization seeking common ground between Business and Labor in public policy debate in New York State. BALCONY is a 501 c(4) non-profit, non-partisan organization.

For more information contact: Lou Gordon (212) 219-7777

GOVERNOR CUOMO, MAJORITY LEADER SKELOS & SPEAKER SILVER ANNOUNCE COMPREHENSIVE PLANS TO CREATE JOBS AND GROW THE ECONOMY

GOVERNOR CUOMO, MAJORITY LEADER SKELOS & SPEAKER SILVER ANNOUNCE COMPREHENSIVE PLANS TO CREATE JOBS AND GROW THE ECONOMY

Governor Andrew M. Cuomo, Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver today announced that they have reached a proposed three-way agreement on legislative and executive proposals to create jobs and cut taxes for middle class New Yorkers. The agreement includes support for a comprehensive New York Works Agenda that will create thousands of jobs with new investments in New York’s infrastructure, passing a fair tax reform plan that achieves the first major restructuring of the tax code in decades resulting in a tax cut for 4.4 million middle class New Yorkers taxpayers, approving $50 million in additional relief for areas devastated by recent floods, and reducing the MTA payroll tax to provide relief for small businesses. The leaders will now present the agreement to their members for approval.

“Our state government has come together in a bipartisan manner to create jobs, grow our economy and, at the same time enact a fair tax plan that cuts taxes for the middle class,” Governor Cuomo said. “We are investing in projects that will restore our state’s infrastructure and put thousands of people to work. We are cutting taxes on middle class New Yorkers and small businesses, which will inject nearly $1 billion into our economy. We are targeting new tax credits to hire inner city youth and reduce unemployment in some of the poorest areas of our state, as well as providing direct aid to communities struggling to recover in the wake of this year’s severe storms. This would be lowest tax rate for middle class families in 58 years. This job-creating economic plan defies the political gridlock that has paralyzed Washington and shows that we can make government work for the people of this State once again. I commend Majority Leader Skelos and Assembly Speaker Silver for their partnership in our effort together to create jobs for New Yorkers and put our state’s economy on a path for growth.”

“This year, working in a bipartisan manner, we’ve accomplished some very important things for the people of this State – - including eliminating a $10 billion deficit, bringing spending under control and capping property taxes,” Majority Leader Skelos said. “This comprehensive plan will reduce the tax rate for middle class families to their lowest levels in more than fifty years, create thousands of new private sector jobs, and begin to turn our economy around. I am pleased that this proposed agreement realizes long-held Senate Republican priorities like cutting the corporate franchise tax for manufacturers, reducing the job-killing MTA payroll tax for small businesses, eliminating New York’s stealth tax by indexing tax brackets and deductions, and building our reserves, along with providing additional flood relief to support job growth in devastated communities. I am looking forward to presenting this framework agreement to the members of our conference tomorrow and hearing their feedback.”

“Assembly Democrats share the Governor’s belief that we need to restore fairness and equity to our tax system – someone who makes $50,000 should not be paying the same tax rate as someone making $5 million,” Speaker Sheldon Silver said. “With Governor Cuomo’s leadership, we have forged a bipartisan plan that is fair to all New Yorkers and will help build a brighter economic future for this State. I am submitting to my conference a proposal that will provide $2 billion in revenue for the people of New York in each of the next three years by creating a more progressive tax structure, coupled with a significant middle class tax cut. I will recommend that they give it favorable consideration. I congratulate the Governor for helping to forge this comprehensive plan to revitalize New York State’s economy.”

The Governor’s New York Works Agenda will create tens of thousands of jobs through a $1 billion targeted and accelerated investment in key infrastructure projects around the state including roads, bridges, parks, energy and water projects. The NY Works Agenda also includes pursuing a comprehensive gaming plan and enacting a new tax credit to incentive the hiring of inner city youth.

The Governor and the legislative leaders have agreed to tax code reforms including a temporary restructuring of current tax brackets to reduce taxes for 4.4 million middle-class New Yorkers. The Governor is also establishing a commission to examine a comprehensive overhaul of the state’s entire tax code that will make it simpler and fairer for all taxpayers and to create economic growth in the state.

In addition to these agreements, the Governor and legislative leaders announced a new round of flood relief, including a $50 million grant program for at businesses and counties impacted by Hurricane Irene and Tropical Storm Lee. The plan also includes a job retention tax credit for businesses impacted by a natural disaster during the last year. Finally, the Governor and legislative leaders announced that the MTA payroll tax will be reduced for small businesses.

The details of the proposed agreement are as follows:

The New York Works Agenda

New York Works Infrastructure Fund: Creating Jobs by Rebuilding New York

The Governor and the legislative leaders have agreed to a plan creating New York’s first infrastructure fund to inject over $1 billion in job creating investment. The accelerated state funding will leverage $10 billion in direct capital investment to create thousands of direct jobs by rebuilding roads and bridges; parks, dams and flood control projects; upgrading water systems and educational facilities; and investing in energy efficient improvements to commercial and residential buildings. The plan will focus on projects that support regional Economic Development Plans in the transportation, energy, environment and public facilities sectors. The accelerated infrastructure fund investment is within the state’s debt ceiling.

Specific investments undertaken by the New York Works Infrastructure Fund include replacing deficient state and local bridges in every region of the state, rehabilitating dams and flood control infrastructure, renovating parks, rebuilding water systems, conducting energy retrofits on homes, farms, businesses, and schools, as well as accelerating major SUNY and CUNY projects.

The Governor and the legislative leaders agreed on proposing legislation that will permit the New York Works Infrastructure Fund to bid the design and construction of infrastructure projects as a single contract, reducing costs and improving construction time. Passage of “Design-Build” legislation would shave 9 – 12 months from the construction time of major infrastructure projects. The Fund would also streamline permitting and regulatory approvals for infrastructure projects and procurements and consolidate activities across agencies and authorities.

Financing for the infrastructure fund would be provided through advancing capital investment and the creation of a public/private infrastructure fund. $700 million in state capital investments would be front loaded to increase job and economic impact by moving up capital projects planned for 2013 to 2012 wherever possible. An additional $300 million from the Port Authority would be directed towards funding for infrastructure projects in New York City. A new public/private infrastructure fund would raise up to $1 billion from pension funds and private investment.

Gaming Agreement

The Leaders expressed support to work with the Governor and request support from their respective majorities to put a constitutional amendment up for a vote.

Inner City Youth Employment Program and Tax Credit

The Governor and the legislative leaders agreed to create an inner-city youth employment program and a $25 million tax credit for employers who hire unemployed youth between 16 and 24 years of age over the first six months of 2012. The program and credit would be available to employers in businesses such as clean energy, healthcare, advanced manufacturing and conservation. Eligible employers would receive up to $3,000 for a six month training period and an additional $1,000 if they retained their workers for an additional six months.

Nearly $37 million in funding will be provided to critical jobs programs for inner city youth. This includes $12 million in support grants to youth providers for work readiness training, occupational training, placement or job matching, workplace mentoring and follow up services to increase retention. Participating youths will be provided with up to three monthly stipends of $300 each to cover costs associated with transitioning into the workplace. An additional $25 million will be appropriated for workforce skills training and support programs including digital literacy, basic education and occupational training, summer youth employment, job search and placement, and facilitated child care enrollment.

Fair Tax Code Reform

The Governor and the legislative leaders announced tax code reforms to create jobs and restore fairness to the tax system. Under the new rate structure, a total of 4.4 million New Yorkers would receive a tax cut, including a $690 million reduction for middle class taxpayers, and all taxpayers would see a tax reduction or no change compared to their previous tax bill. Brackets would increase with the rate of inflation. The newly implemented top bracket expires in December 31, 2014.

The new tax structure would generate $1.9 billion in additional revenue for the State. Any additional unspent funds from this revenue would be held in a new priority reserve fund to be dedicated towards future needs regarding job creation, local mandate relief, education, health care and mortgage foreclosure protection.

The new tax bracket structure would be reorganized as follows:

Income Level	Previous Tax Rate	New Tax Rate
$40,000 to $150,000	6.85%	6.45%
$150,000 to $300,000	6.85%	6.65%
$300,000 to $2 million	7.85% – 8.97%	6.85%
Over $2 million	8.97%	8.82%

Through an executive order, the Governor has created the New York State Tax Reform and Fairness Commission to address long term changes to the tax system and create economic growth. The commission will have thirteen members, including four recommended by the Senate and Assembly majority leaders and two recommended by the Senate and Assembly minority leaders. The chair of the Commission will be appointed by the Governor. All members are required to have expertise in the tax field and will receive no compensation.

The Commission will conduct a comprehensive and objective review of the State’s taxation policy, including corporate, sales and personal income taxation and make revenue-neutral policy recommendations to improve the current tax system. In its review, the Commission will consider ways to eliminate tax loopholes, promote administration efficiency and enhance tax collection and enforcement.

Flood Recovery Grant Program

The Governor and the legislative leaders have agreed to establish a $50 million grant program to continue recovery efforts in regions of the State impacted by Hurricane Irene and Tropical Storm Lee.

The program includes the following support for communities recovering from the storms:

· $21 million for small businesses, farms, multiple-dwellings and non-profit organizations that sustained direct physical flood-related damage costs not covered by other federal, State or local recovery programs. Grants would be limited to $20,000 and eligible only to companies that are on the Small Business Administration’s list of companies that have sustained damage.

· $9 million for county flood mitigation or flood control projects. The grants for each county would range from $300,000 to $500,000; however, counties could jointly apply. Eligible counties must be included in Federal disaster declarations

· An additional $20 million included in federal disaster declarations distributed on an as needed basis
· Permitting local government to let taxpayers impacted by the storms to pay their property taxes in installments

Jobs Retention Credit for Businesses Impacted by a Natural Disaster

The Governor and the legislative leaders have agreed to the enactment of a job retention credit for businesses harmed by a natural disaster. The credit would be available to firms with at least 100 employees that have retained or expanded their workers’ roles during this time. The credit would equal 6.85 percent of the wages of retained jobs and is targeted towards employers in financial services, manufacturing, software development, new media, scientific development, agriculture and other sectors.

Reduced Manufacturing Tax Rate

The Governor and the leaders agreed to provide a new reduction in the tax provided to corporate manufacturers by lowering their tax rate that would save them $25 million.

Reducing the MTA Payroll Tax

The Governor and the legislative leaders have agreed to reduce the MTA payroll tax on small businesses while maintaining the necessary funding for the MTA from other sources. The payroll tax would be eliminated or reduced for 294,900 taxpayers overall. The tax would also be eliminated from an additional 415,000 taxpayers by raising the self-employment income exemption. In addition, private elementary and secondary schools, as well as parochial schools, would be exempt from the tax. The State would compensate the MTA for the $250 million in lost revenue.

FPI Report: Reforming the New York Tax Code

New York State is at a crossroads. Our tax structure is scheduled to change in a way that will render state revenues inadequate for the budget years ahead. Hundreds of thousands of households struggle to pay property tax bills that represent an inordinate share of their incomes. And, in the aftermath of the Great Recession, far too many New Yorkers are still looking for jobs as good as the ones they used to have.

What can be done? What strategies can we pursue that will increase revenues to preserve the services that support New Yorkers’ quality of life and make it possible for families to move up the socioeconomic ladder—and that will, at the same time, make the tax system fairer?

Read the entire report: Tax Code

Analysis: Honeymoon over? Gov. Cuomo faces critics

by MICHAEL GORMLEY, Associated Press

ALBANY, N.Y. (AP) — Gov. Andrew Cuomo is still riding high in polls and may continue to be invincible, but he’s no longer invulnerable.

After more than a half-year’s honeymoon, some critics who were too enamored — or too scared — of the Democrat are beginning to speak out. Cuomo spent his first six months masterfully managing politics in a string of policy wins from cutting the state budget to legalizing gay marriage. Powerful teacher and health care unions let him lead funding cuts to schools and hospitals. Public sector unions watched him threaten layoffs and were forced to accept contract concessions.

But along the way, he has baffled and, ultimately, riled his liberal base.

Now Democrats have to grapple with their progressive leader who tried to evict the Occupy Wall Street demonstrators in Albany. Protesters camping in “Cuomoville” dubbed him “Gov. 1 Percent” for refusing to extend a tax on people making more than $200,000 per year, and catering to the richest minority, which includes his biggest campaign donors.

“We demand that you get your priorities straight,” said Jackie Hayes, 29, of Binghamton, a student at the University at Albany in a brief rally inside the Capitol. “It is a political platform that only serves your ambitions.”

As a result, Cuomo hasn’t spent much time in Albany since the contingent set up camp across from the Capitol. That’s helped him avoid any uncomfortable photos.

Cuomo also was rebuffed by another Democrat. Albany Mayor Jerry Jennings, despite his usually cozy relationships with governors, refused to push protesters out of the city park, even under pressure from Cuomo’s top aides.

“The state’s position is we have to enforce the curfews if we are going to operate the (state) complex,” Cuomo said.

But the little-visited park isn’t used for state activities and other protests usually bypass it for more visible spots at the Capitol’s main entrances. In the park, protesters have cooperated fully with state police, quieted their chants inside the Capitol and even raked leaves as they railed against a government-corporate alliance they say is making the richest 1 percent even richer at the expense of the other 99 percent.

Cuomo’s opposition to extending the state’s so-called “millionaire’s tax,” which he said would drive the rich to neighboring, lower tax states, has made him a rare target among Democrats nationwide, many of whom publicly support the tax.

“The governor has made a historic mistake,” said Bill Samuels, an upstate CEO who founded the progressive organization called the New Roosevelts that seeks to nurture a new generation of reformers in New York. He said Cuomo was wrong to oppose the millionaire tax because CEOs are more concerned with the quality of life, schools and infrastructure when locating businesses, all of which the tax could help fund.

But Cuomo, like his father Mario Cuomo before him, notes he is governing in hard times. The state faces a projected 2012-13 deficit of more than $2 billion.

From 1989 to 1992, boom turned to bust for the Mario Cuomo administration and he went from cutting the top personal income tax rates to hiking taxes, which critics said worsened New York’s decline and led to his defeat. In 1994, Republican Gov. George Pataki immediately started cutting taxes and spending. He served for three terms.

“I once used the line that I’m progressive, but I’m broke,” said Gov. Andrew Cuomo, paraphrasing President Clinton’s line that he’s a “bleeding-heart cheapskate.”

“We have programs and policies that are seeking to advance this state, are advancing the state,” Cuomo said.

“I have to govern in this situation with these facts,” he said. “And I have to represent the people the best way I can with these facts and these facts are we that are in the middle of an economic recession, it is nationwide, the state has a multibillion deficit, and how are you a progressive leader in that context.

“I could argue this is probably a greater test of leadership. How do you make it work in this moment?”

Although opposition is growing, it’s common when a governor changes the status quo. And it’s still just a “nascent revolt” with the public and Legislature still on his side, said Robert Ward of the Rockefeller Institute of Government.

“There’s a function of time, you always get a honeymoon,” said David Grandeau, the state’s former lobbying enforcer praised by good-government groups as Albany’s most effective watchdog in decades.

“He is probably feared more than he’s loved,” said Grandeau, offering that Cuomo is “the best leader New York has had in a generation.”

“Fear is a better motivator, but the fear thing only works as long as someone’s head is on a pike outside city hall,” Grandeau said. “If you combine those two things — time and the bark sometimes is worse than the bite — you are going to find people coming forward.”

Cuomo faced criticism this year after flooding. He promised flood-ravaged towns would be rebuilt better than they were before, but private insurance handled little of the flooding damage and federal assistance was delayed. Weary residents took it out on the governor.

On Tuesday, Cuomo allowed: “I’m not happy with the results.” He reiterated that flood recovery is primarily a federal responsibility.

Cuomo’s immediate opposition is Occupy Albany, a coalition of unions and those seeking the millionaire’s tax to avoid further cuts to schools, hospitals and public services.

“Are we surprised he’s taken such a hard line on this particular issue? Absolutely,” said Ron Deutsch, a longtime Albany lobbyist working for New Yorkers for Fiscal Fairness, a broad labor and school coalition. “I’m not sure he really believes all the rhetoric himself.”

But Deutsch said the push for a millionaire’s tax is gaining traction just as the legislative session approaches and lawmakers prepare to go back to voters to campaign during the 2012 election year.

“You are seeing legislators more emboldened than before because of all the support and because of the Occupy movement,” Deutsch said.

Not least of whom is the powerful and cagey Assembly speaker, Democrat Sheldon Silver.
“The public is clearly with us,” Silver said Tuesday. “I think we and the public can win that discussion.” Then he said of Cuomo, “I didn’t say he wouldn’t change his mind.”

Warren Buffett’s Tax Dodge

OPINION

Barney Kilgore, the man who made the Wall Street Journal into a national publication, was once asked why so many rich people favored higher taxes. That’s easy, he replied. They already have their money.

That insight is worth recalling amid the latest political duet from President Obama and Warren Buffett demanding higher taxes on “millionaires and billionaires.” Mr. Buffett is repeating his now familiar argument this week, coinciding with Mr. Obama’s Midwestern road trip on the economy. Since the media are treating Mr. Buffett as a tax oracle, let’s take a closer look at some of the billionaire’s intellectual tax dodges.

• The double tax oversight. The Berkshire Hathaway magnate makes much of the fact that he paid only 17.4% of his income in taxes, which he considers unfair when salaried workers often pay more. But Mr. Buffett makes most of his income from his investments, in particular from dividends and capital gains that are taxed at a rate of 15%.

What he doesn’t say is that much of his income was already taxed once as corporate income, which is assessed at a 35% rate (less deductions). The 15% levy on capital gains and dividends to individuals is thus a double tax that takes the overall tax rate on that corporate income closer to 45%.

This onerous tax on capital is a U.S. competitive disadvantage in the global economy, which is why Congress agreed in 2003 to cut the rates on dividends and capital gains. Even as the rest of the world is cutting tax rates on corporate income, Mr. Buffett wants to raise U.S. rates in a way that would make America less attractive for investment. Under a sensible tax reform, the feds would impose either a corporate tax or a dividend and capital gains tax, but not both.

• The middle-class bait-and-switch. Like Mr. Obama, Mr. Buffett speaks about raising taxes only on the rich. But somehow he ignores that the President’s tax increase starts at $200,000 for individuals and $250,000 for couples. Mr. Obama ought to call them “thousandaires,” but that probably doesn’t poll as well.

The President needs to levy his tax increase at such a lower income level because that’s where the money is. In 2009, 237,000 taxpayers reported income above $1 million and they paid $178 billion in taxes. A mere 8,274 filers reported income above $10 million, and they paid only $54 billion in taxes.

But 3.92 million reported income above $200,000 in 2009, and they paid $434 billion in taxes. To put it another way, roughly 90% of the tax filers who would pay more under Mr. Obama’s plan aren’t millionaires, and 99.99% aren’t billionaires.

Mr. Buffett says it’s only “fair” to raise his taxes, but he’s lending his credibility to raising taxes on millions of middle-class earners for whom a few extra thousand dollars in after-tax income is a big deal. Unlike Mr. Buffett, those middle-class earners aren’t rich and may earn $250,000 for only a few years of their working lives. How is that fair?

• The charity loophole. For billionaires like Mr. Buffett, the single most important deduction in the tax code is for charitable giving. Middle-class earners can’t give nearly as much money away to reduce their overall tax burden. Yet we don’t hear Mr. Buffett calling for the elimination of that deduction in the name of fairness.

Mr. Buffett has also already sheltered the bulk of his fortune from federal taxes by putting them into a foundation that will give the money away. That’s an act of generosity, but if the government’s purposes are so vital, why doesn’t he simply give the money to the IRS?

Rebecca Quick of CNBC put that question to Mr. Buffett in 2007. His answer: “Well, that’s a choice and it’s an option . . . If I had to give it to a single individual, or make some young Buffett a multibillionaire, or give it to the government, I’d absolutely give it to the government. I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government.”

Mr. Buffett is no doubt right about the relative efficiency of private donors, but should billionaire philanthropists get such a large tax preference? Another case of fairness?

Mr. Buffett is one of the great stock-pickers of his time, and we don’t begrudge him a single dollar of his wealth. We only wish that, having already made himself rich, he weren’t so intent on making it harder for others to become rich too. If he’s worried about being undertaxed, we’d suggest he simply write a big check to Uncle Sam and go back to his day job of picking investments.

Stop Coddling the Super-Rich

By WARREN E. BUFFETT

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

Proposed New York property tax cap is much more restrictive than the Massachusetts cap after which it is supposedly modeled.

No lawmaker or taxpayer should be one bit reassured by the Massachusetts experience with a tax cap. New analysis from FPI’s Frank Mauro shows what a New York-style tax cap would mean if it had been in effect in Massachusetts over the last decades. Property tax revenues would be less than half what they are today, with devastating implications for the entire array of locally-funded public services.

Click here for the full document.

Reject the Tax Cap

Gov. Andrew Cuomo and the New York State Legislature have already adopted a state budget that drastically cuts funds to schools and local communities — cuts that were far deeper than needed to balance the budget because of Mr. Cuomo’s indefensible refusal to extend a tax surcharge on New York’s wealthiest residents. Now they want to adopt a cheap political tool — a 2 percent property tax cap — that would only further devastate communities around the state that can least afford it.

Mr. Cuomo calls the proposal “a game changer.” He’s right. In the same way that Proposition 13 has ravaged California, a New York property tax cap would do huge damage to already struggling schools and the state’s long-term economic competitiveness. California’s education system was once the envy of the nation. Education Week now ranks it 46th for achievement in grades K-12, below Alabama and South Carolina. New York schools currently rank 8th. For how much longer?

Not surprising, the Albany politicians and business leaders championing the tax cap don’t like to talk about California. Instead, they point to Massachusetts, which capped property taxes at 2.5 percent in 1980. It wasn’t a happy tale there, either. Communities starved of needed revenues were forced to lay off teachers, police officers and firefighters and to shut libraries and senior centers.

Massachusetts schools suffered so badly that the Legislature had to pump in more and more state financing, especially to the poorer school districts.

Mr. Cuomo and other backers insist that communities will still have a choice. The cap could be overridden by a vote of 60 percent of residents in the tax district. (Whatever happened to a simple democratic majority?) Wealthier taxpayers may well vote that way, especially to maintain good schools. It is far less likely to happen in the poorer districts.

When New York’s politicians go on about how New York fails to draw businesses because of high taxes, even they must know that’s ridiculous. Taxes generally rank behind education, infrastructure and other criteria when businesses decide to relocate and invest. Employees and bosses want to know about the schools. Business owners want to know if there is an educated work force. No public services? Who wants to move or work there?

Let’s be clear: A tax cap is nothing more than a political crutch for politicians who don’t have the courage to argue the case for more taxes or for spending cuts.

Mr. Cuomo, the Legislature and local politicians have to make the tough decisions to raise revenue and wrestle down personnel costs, streamline services and rationalize costly state mandates.

Property taxes in New York are undeniably high. But a tax cap is not the answer. It is an invitation to disaster.