Many of you were confused (or perhaps annoyed) by the table I posted a couple of days ago in my blog entry on the new tax rules, finding it somewhat internally contradictory.

The investigative news organization (and sometimes NPR partner) Propublica has an article today that makes it clear why some are saying taxes are going down for the superrich, and others are saying they’re going up.

Here’s a teaser:

“Under the overhaul, which was passed on Thursday, one bracket of wealthy New Yorkers will be getting a bigger tax cut than the taxpayers in any other bracket. Specifically, individuals making between $500,000 and $2 million will pay 2.12 percent less in state income taxes for 2012. In contrast, individuals making between $40,000 and $150,000 are only getting a reduction of 0.4 percent, as this New York Times chart shows.”

What, you say? Everyone said they’re getting a tax hike! Well, they are, relative to the base tax rate in NYS:

“New York Gov. Andrew Cuomo — and apparently, much of the media — has been using New York’s base rate of 6.85 percent to calculate the “raised” taxes for the rich. But for the past three years, wealthy New Yorkers making more than $200,000 (or $300,000 for households) have paid the base rate along with an income-tax surcharge on top of it. It’s also known as the “millionaires’ tax,” and it expires at the end of this year.”

Enjoy!

Governor Andrew Cuomo has been nothing if not consistent on the question of raising taxes for high-end earners:  From his campaign through his latest duels with public employee unions, he condemned the idea.

It would, he argued, make New York state uncompetitive and might even drive millionaires out.  This is a quote from October 17th:

“You are kidding yourself if you think you can be one of the highest-taxed states in the nation, have a reputation for being antibusiness—and have a rosy economic future.”

Then, last weekend, there was an abrupt about-face in the form of editorials, penned by Gov. Cuomo, which appeared in newspapers around the state.

Suddenly, the Democrat was describing the current tax code as unfair and suggesting that millionaires, in fact, do need to pay more, while middle class earners have their taxes cut.

It seemed like the opening salvo — a trial balloon maybe? — in a major new policy shift.

But in fact, that editorial was a quick “hold onto your hats” gesture, signaling that we were about to see a major shift in our tax code — as in, right now.

With no public hearings and no public debate, the governor had struck a behind-the-scenes deal with legislative leaders in Albany that will shift significantly more of the tax burden to the wealthy.

Regardless of what you think about the deal itself, it’s hard to view this as a shining example of open democracy and debate.

Yesterday, New York’s League of Women Voters, Common Cause and the Public Interest Research Group put out a joint statement questioning the process.

The announcement today of leadership’s agreement on a proposal to revise the state’s tax code responds to the call by many to make tax policy fair.

However, the process by which the deal was struck is a continuation of the backdoor-deal making that has defined Albany culture.

It is important that the people’s business – particularly policies that will directly impact the taxpayers and the economic health of this state – be conducted in the open.

The public should have an opportunity to learn of, and comment on, such important fiscal and policy matters, not simply be informed after the fact.

Matters of this magnitude should not be decided in secret, during the legislative hiatus and without a formal process.

Each of these important issues should be the subject of hearings and public discussions, with sufficient time for the public to understand and comment on what may be proposed or under consideration.

These concerns are underscored as these issues have not been the subject of recent hearings and the substance of today’s announcement has not been previously vetted through the formal legislative process.

Accordingly, the tax code should not be hustled through a special session, where these crucial matters are debated in closed conferences and then voted on the next day.

The point, really, is that if state officials can strike a good deal quickly and in secret (and again, it’s open to debate whether this is a good deal), what’s to stop them from doing really awful things quickly and in secret?

What do you think?  Did this deal take you by surprise?  Is it okay a policy shift of this magnitude occur behind closed doors?

And while it doesn’t involve extending the millionaire’s tax, it does involve raising taxes on the very wealthy, at least temporarily.

This news just came out a few minutes ago via a press release from Governor Andrew Cuomo’s office, but the New York Times has a nice summary here.

Essentially, the deal will create several new tax brackets–the newly- implemented top bracket expires in December 31, 2014.

Those new brackets are shown in a handy table, below, from the governor’s press release. (PLEASE NOTE the figures in the table are comparing tax rates with the millionaire’s tax in effect, to those under the new deal, and that’s why it looks like almost everyone’s getting a tax cut.)

The new brackets would mean that every married-filing-jointly couple (so romantic!) that makes less than $300,000 will get a tax cut. And couples making more than $2 million–such as the Monopoly man and Mrs. Monopoly–will pay about 2% more (See the NYT article for a little more nuance on this).

Interestingly, it appears the top “middle class” tax bracket–couples making between $300,000 and $2 million a year–will be the ones to see their tax rates drop most significantly. Under the existing code, they paid between 7.85% and 8.97%–now they’ll pay 6.85%. But that tax rate would have dropped back to 6.85% in any event, when the millionaire’s tax expires at the end of the year.

Those making less than $300,000 will see their rates drop less than .5%.

These numbers are difficult to parse, but I’m going by what’s in the press release. Here’s that information, keeping in mind the top bracket’s rate’s are dropping compared to their current (with-millionaire’s-tax) rates:

As is clear, that increase in the top tax bracket’s rate won’t entirely replace the revenue that’s lost when the millionaire’s tax expires. But according to the press release, it will bring in $1.9 billion that would otherwise have been lost. Again, that top bracket expires at the end of 2014–and apparently the brackets would “increase with the rate of inflation.”

I’m sure we’ll be unpacking the complications of these new rules in the days, weeks and months ahead.

A foolish consistency is the hobgoblin of little minds, adored by little statesmen, philosophers, and divines — or so thought Ralph Emerson.

Is that the proper context for viewing Governor Andrew Cuomo’s sudden embrace of a plan that would cut middle-class tax rates, while boosting taxes on the wealthy next year?

This from the Associated Press:

The Democrat released an opinion piece for newspapers Monday, building a case for revision of tax brackets and rules to make it “fairer” after decades of inaction. His proposal, major elements of which are still being negotiated with legislative leaders, drew immediate praise and rebuke.

“It is the end of the dominance of the anti-tax message politically,” said Richard Brodsky, a former assemblyman from Westchester who is now a senior fellow at the Wagner School at New York University. “It’s a master stroke from Cuomo in that he doesn’t just solve New York’s problems, he now gets into a national conversation about bipartisanship and fairness in the economy. … This will change national debate.”

Others saw a flip-flop.

“This is just painting a distorted picture of the current and past tax system in order to justify what he’s doing,” said E.J. McMahon of the fiscally conservative Manhattan Institute. “He wants to increase taxes for wealthier New Yorkers, so he is inventing this narrative.”

You can read Gov. Cuomo’s public letter on all this here.  He appears to cut to the chase in this passage:

Simply put, to me “fairness” dictates that the more you make the more you pay and the higher your income the higher your rate. Also, you should be treated the same as people with similar incomes and differently from people who make significantly more, or significantly less, than you earn.

I would create multiple brackets and rates increasing on a graduated basis throughout and indexed to inflation. I would add more income brackets for the middle income and add high end brackets. The actual rate span should be several points from low to high.

So what do you think?  Does New York need a new tax system, one that shifts a bit more of the burden to high-end wage earners?  Is the current system, as the governor argues, unfair?  Comments welcome below.

Newsday is reporting that 34 of the 234 municipalities which have reported their budgets to the state Comptroller’s Office have voted to override the new state property tax cap. Thousands more have yet to report to the comptroller; some of them, including St. Lawrence and Franklin counties, have taken the preliminary steps of a public hearing and a local law that will allow an override if and when  local officials decide they can’t live within the 2 percent limit on increases.

The New York Times is also reporting local pushback on the tax cap today.

The communities, which include affluent New York City suburbs and rural communities near the border with Canada, are declaring that they cannot restrain the growth of property taxes and still comply with a variety of state-mandated programs and provide the services residents expect.

The Times quotes Gregory J. Edwards, the county executive of Chautauqua County. He’s a Republican who ran for lieutenant governor last year. In a letter to residents this month he called the cap  a political “scam.”

“The 2 percent property-tax cap is nothing more than a campaign slogan meant to get them re-elected and give local leaders the pain for their failure to act,” Mr. Edwards wrote in his letter, referring to Albany lawmakers.

According to the Times, Edwards has proposed a tax increase of nearly 13 percent for Chautauqua County, which he says is entirely attributable to increases in state-mandated costs.

There’s more:

Each passing day seems to bring a new act of legislative rebellion. In just one week this month, on Monday, the Town Board in Hammond, in the Thousand Islands region, voted to override the cap; on Tuesday, the Board of Supervisors in Seneca County introduced a measure to do the same thing; on Wednesday, town officials in Massena, in St. Lawrence County, passed their own override; and on Thursday, the Town Board in Harrietstown, in the Adirondacks, followed suit.

And from Cuomo:

But Mr. Cuomo is now emphasizing the cap’s symbolic value, saying “this mentality of automatic pilot, where the property taxes just keep going up 5, 6, 7 percent every year,” will no longer be tolerated by New Yorkers. Indeed, in some communities, residents have chastised their local officials for not sufficiently embracing his push to keep taxes down.

“What you’re seeing this year, which you didn’t see in years past: there is much more attention and discussion about the increases in the property tax,” Mr. Cuomo said. “That is a great accomplishment and a great positive.”

What do you think?