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New York tax break in works for couples earning less than $300,000

ALBANY – State budget negotiators have tentatively agreed to provide an income tax cut for New Yorkers earning less than $300,000 a year, but struggled for another day in the face of fierce opposition from the business community on a plan to sharply hike the minimum wage in the coming years.

The minimum wage and other disagreements that lingered through the day Wednesday will make it increasingly difficult for lawmakers and Gov. Andrew M. Cuomo to achieve an on-time budget.

But Albany has proven over the years to be a town of lawmaking miracles, so no one was quite willing to rule out reaching a budget accord by midnight Thursday.

The income tax cut would be worth about $1 billion, though those savings for taxpayers will be phased in over an eight-year period. It has been pushed in budget talks as an “offset” for hiking the minimum wage because, in part, many small business owners will benefit because they file through the state income tax instead of the corporate tax.

The income tax plan, as tentatively agreed to Wednesday, would affect three different tax brackets, and benefits of the cut would be capped on incomes under $300,000 annually for married couples who file joint tax returns. Though proponents called it a “middle-class tax cut,” much of the cash value of the decrease will go to residents in downstate where wages are higher than upstate.

The deal, according to one official, would lower the current state tax of 5.9 percent to 5.5 percent on incomes for married couples with incomes between $26,000 and $40,000, and from 6.57 percent to 6 percent on those making $300,000 annually. The rates for incomes between those figures have not been revealed.

Under one plan being discussed, the tax breaks would not be available until 2017.

The Albany budget-making rule of “nothing being a deal until everything is a deal” applies, also, to the income tax cut. One official Wednesday night cautioned that the tax break is “still in flux.’’

Assembly Democrats have promoted a middle-income tax cut combined with an additional tax hike on wealthy New Yorkers. The second component of that plan already died on the negotiating table. Senate Republicans also recently proposed a middle-income tax break.

Cuomo confirmed to reporters that the “framework” of a tax cut has been agreed to by the sides and that it would total $1 billion. He called it “a very, very big deal.’’

Assembly Speaker Carl Heastie, a Bronx Democrat, said, “We’re OK with it. It’s really more of a Senate request, but we’re OK.’’

Senate GOP leader John Flanagan declined to discuss the plan.

Tensions rose behind closed doors and in public Wednesday, with frustrations becoming obvious over the pace of the talks with the Thursday deadline looming.

Cuomo went so far as to suggest a state commission might not give lawmakers a raise if the budget is late. That commission, due to meet after Election Day in November, includes Cuomo appointees and has the final say on what legislative pay rates will be. Cuomo said an on-time budget could be one of the “performance” factors that lawmakers could use in pressing its cause for higher salary levels.

“I think it’s critically important that we do have an on-time budget. It’s the most important job that we have and citizens suffer if we do not do our job properly,’’ said Sen. Patrick Gallivan, an Elma Republican.

But another Senate Republican, John DeFrancisco from the Syracuse area, said the Senate GOP has not been briefed yet on a number of key budget issues. He urged colleagues to “jettison” the minimum wage debate from the fiscal talks in order to ensure an on-time budget. He called Cuomo’s $15-an-hour minimum wage level a “political number” not based in economics.

The wage issue is an especially hard item for many Senate Republicans to digest. They are under pressure from business interests to reject or at least heavily water down the Democrats’ plan.

After a long, closed-door GOP conference, Sen. Rich Funke, a Rochester-area Republican, said: “Any number of us in there cannot live with what the governor’s proposing.”

Business groups, not-for-profit organizations, hospitals and nursing homes are among just some of the groups on hand Wednesday trying to beat back or weaken the minimum wage plan. They focused their efforts, and lobbyists, in and around the Senate chamber. Mike Durant, state director of the National Federation of Independent Business, said that it is “becoming clear that the path Albany is taking will be disastrous for New York’s small employers.’’

Cuomo has softened his demand for the current $9 per hour minimum wage to rise to $15 statewide. Now, he says, there would be a “pause” in the rate of increase for upstate regions after three years to give the state an opportunity to examine the state of the economy and if the rate could continue going higher to the $15 level. Cuomo called that a “perfect design,’’ but Senate Republicans, though, were upset that Cuomo’s budget office was being offered as the arbiter in that economic analysis.

“The last thing I want is anything that slows the growth of the upstate economy,’’ the governor said.

“We want to raise the minimum wage to a wage where a person can support a family with dignity and decency. But we want to do it in a way that stimulates the economy and certainly doesn’t hinder the economy, especially in upstate New York,’’ he added.

Minimum wage advocates were pressing Cuomo to not buckle on a $15 wage for upstate. Ron Deutsch, executive director of the Fiscal Policy Institute, one of the labor-backed organizations pressing for the wage increase, estimated that 1.2 million upstate residents would benefit from a $15 per hour minimum wage.

“It’s clear that about 39 percent of those affected are in upstate New York, which would be phased in at the slowest rate,’’ he said, urging Cuomo to stick to his original plan to make the $15 level effective in six years. “We think that’s appropriate,’’ he said.

A snag involving state Medicaid cuts to New York City – which was a major line-in-the-sand for Assembly Democrats who hold 62 seats in the Assembly – was resolved Wednesday. “Medicaid was big. It kind of sucked up a lot of oxygen in the room, and that fact that it’s better (then) we’re in a better position,’’ Heastie told reporters.

As night fell, Cuomo huddled alternately in one meeting with Flanagan and Heastie. It was a usual drill after the closed-door talks ended: legislative leaders doing their best to avoid answering too many specifics. With a trail of reporters after him, Heastie, in a reference to one of his favorite television shows, said, “I feel like this is ‘The Walking Dead.’ ”