All New Yorkers will see a state income tax reduction in 2012 under a new tax code approved last week by state legislators.
Currently, the income tax rate for those filing as individuals is 6.85 percent for annual incomes of $20,000 to $200,000, 7.85 percent for incomes ranging from $200,000 to $500,000 and 8.97 percent for incomes over $500,000.
The changes agreed to in Albany now set income tax rates at 6.45 percent for incomes ranging from $20,000 to $75,000, 6.65 percent for incomes ranging from $75,000 to $200,000, 6.85 for incomes between $200,000 and $1 million and 8.82 percent for incomes above $1 million.
Thus, a person making $200,000 would pay $2,400 less in state taxes under the new formula, while a person making $100,000 would pay $200 less.
For married people filing jointly, the current rates are 6.85 percent for incomes of $40,000 to $300,000, 7.85 percent for incomes between $300,000 and $500,000 and 8.97 percent for incomes over $300,000.
The new rates are 6.45 percent for incomes between $40,000 and $150,000, 6.65 percent for incomes between $150,000 and $300,000, 6.85 percent for incomes between $300,000 and $2 million; and 8.82 percent for incomes over $2 million.
These new rates reflect something of an extension of the so-called millionaire’s tax for the highest earners but a reduction in the tax rate for others.
The millionaire’s tax, which lawmakers call a surcharge, took effect in 2009 and was set to expire this December. Despite its name, it kicked in at incomes of $200,000 for single filers and $300,000 for married filers. Without the surcharge, the rate would have been 6.85 percent for anyone earning over $40,000 jointly or $20,000 individually, and someone earning $20,000 would have been taxed at the same rate as someone earning more than $2 million.
Thus, the rate for those earning over $2 million is slightly lower than what it had been but considerably higher than it would have been without the millionaire’s tax.
North Fork State Assemblyman Dan Losquadro (R-Shoreham) said he had concerns about raising taxes on people making more than $2 million.
“A married couple with a reportable income of $2 million plus, in my opinion, those are the people who are most able to move,” he said.
He said a lot of small businesses were affected by the surcharge.
Still, he said the tax cuts will help most people.
“It’s a great benefit for everyone up to that level because anyone who did fall into that surcharge rate of $200,000 for individuals and $300,000 for married couples or small business owners, many of them are seeing rate reductions of 2 percent or more in their state income tax rate and that’s fantastic for our small businesses,” Mr. Lossquadro said.
Other local officials praised the new tax structure.
“This bill is the first restructuring of the tax code in decades, and the result is a victory for middle-class and working families” said South Fork Assemblyman Fred Thiele (I-Sag Harbor). “By shifting a piece of the tax burden to those who can most afford to pay it, we were able to cut taxes for middle-class New Yorkers while raising $2 billion per year for jobs and deficit reduction.”
Mr. Thiele said 4.4 million New York residents will see their taxes drop as a result of the new tax code, adding that those making more than $2 million per year comprise only about 1 percent of the population.
He said that a recent Siena Research Institute poll found that 72 percent of New Yorkers supported extending the millionaire’s tax.
State Senator Ken LaValle (R-Port Jefferson) said in a statement: “In sharp contrast to the gridlock in Washington, the New York State Senate Republican majority has worked together with Governor Andrew Cuomo to accomplish major changes and positive reforms this year. The new middle-class tax cut and job creation plan will build on these successes by cutting taxes for hardworking middle-class families and helping to create new private sector jobs.”
PAYROLL TAX CHANGES
Thanks to some last-minute changes, public school districts will no longer be required to pay the controversial MTA payroll tax come Jan. 1.
A deal worked out between Governor Andrew Cuomo and leaders of the state Senate and Assembly had already eliminated the tax for private and parochial schools but not public schools. This deal also eliminated or reduced the tax for thousands of small business owners.
But when the measure came to the floor for a vote, a move was made to eliminate the MTA payroll tax for all schools, according to Mr. Losquadro.
“When the bill language eventually came out on Wednesday, it only included private and parochial schools, so that was unacceptable,” Mr. Losquadro said. “We wanted to include the public schools in the exemption, too. That was one of the big sticking points. Ultimately, we did get the public schools included.”
“We are pleased to see that the state has decided to exempt schools from this tax beginning in April,” said Riverhead School Superintendent Nancy Carney. “While the funds to pay this tax are eventually refunded to the district, we are still forced to pay the tax and wait for reimbursement. This reduction in needed expenditures will help us to reach the goals we need to meet in order to come within the tax cap.”
Ms. Carney said Riverhead’s bill for the MTA transfer tax in the 2011-12 school year was $200,256.
Currently, all businesses must pay a 0.34 percent payroll tax to the MTA, Mr. Losquadro said.
When the new arrangement goes into effect next year, businesses with payrolls under $1.25 million will be exempt. Those with payrolls between $1.25 million and $1.5 million will pay a 0.11 percent payroll tax and those with payrolls between $1.5 million and $1.75 million will pay a 0.23 percent payroll tax, Mr. Losquadro said.
The payroll tax will still be paid by towns, counties and other municipalities, he said. “We weren’t able to eliminate that,” he said.
The deal approved last Wednesday also includes funding to aid communities affected by Hurricane Irene, as well as a provision that will exclude some state Department of Transportation projects from the Wicks Law requirements, which many feel increase costs.
That exclusion does not apply to town or county projects.