Bloomberg News

Cuomo Joins Brown Seizing Chance to Tap Tax-the-Rich Sentiment

December 09, 2011

Dec. 6 (Bloomberg) -- California Governor Jerry Brown and New York’s Andrew Cuomo are seizing on a core sentiment of the Occupy Wall Street movement in seeking higher taxes on the wealthy to offset cuts in education and government programs.

The governors of the first- and third-biggest states by population took aim at the affluent in proposals yesterday. Brown said he’d ask voters to raise income taxes on individuals making more than $250,000 a year and boost the sales levy. Cuomo said he wants an income-tax overhaul that would place a higher burden on top earners.

“The occupiers’ message is much more popular than the movement itself,’’ said Dan Schnur, director of the Unruh Institute of Politics at the University of Southern California, in Los Angeles. “For Brown or Cuomo to take the least-strident aspects of the occupiers’ agenda -- separated from the occupiers themselves -- presents them with a political opportunity that might not have been there a year or two ago.”

U.S. states slashed payrolls to close $91 billion in cumulative gaps in fiscal 2012 budgets, after tax revenue was slammed by the longest recession since the Great Depression, according to the National Conference of State Legislatures. California, the most populous, may face a $13 billion deficit, while New York, the third-largest, projects a $3.5 billion gap.

Demonstrations that started as Occupy Wall Street in New York on Sept. 17 have spread to cities on four continents. Protesters refer to themselves as “the 99 percent,” a reference to economist Joseph Stiglitz’s study showing the richest 1 percent of Americans control 40 percent of the wealth.

‘Undue Burden’

“New York has left the middle class with an undue burden which also hinders economic recovery,” Cuomo, 54, said in an opinion column sent to news organizations yesterday. A $20,000- a-year earner is taxed at 6.85 percent, the same as one who makes $20 million, he said. The state’s lowest rate is 4 percent.

“Fairness dictates that the more you make, the more you pay, and the higher your income, the higher your rate,” Cuomo said.

Brown, 73, yesterday proposed raising levies on individuals making $250,000 a year or more to 10.3 percent, from 9.3 percent. For those earning $300,000 to $500,000, it would climb to 10.8 percent. For single filers with income above $500,000, the rate would climb to 11.3 percent. Californians with income of more than $1 million are now taxed at 10.3 percent.

California’s statewide sales-tax rate would rise to 7.75 percent from the current 7.25 percent. All of the increases would raise $7 billion to go toward education and expire in 2017, Brown said.

$12 Billion Cut

Brown and lawmakers cut more than $12 billion in proposed spending to help balance the $86 billion general-fund budget for the year that started July 1. He failed to win legislative approval to extend $11 billion of higher taxes and fees, since expired.

State officials have said that a sluggish economic recovery is unlikely to produce $3.7 billion in revenue Brown built into the current budget. A shortfall of that size would trigger automatic mid-year spending cuts to schools, universities, social services and public safety.

“I am going directly to the voters because I don’t want to get bogged down in partisan gridlock as happened this year,” the governor said in a statement.

Multiple Brackets

Cuomo’s plan would create multiple brackets with rates increasing on a graduated basis and indexed to inflation, he said. Brackets would be added for middle- and high-income earners, and rates would span several percentage points from high to low.

Cuomo, who closed a $10 billion deficit this year, supports letting his state’s so-called millionaire’s tax lapse, which prompted the Occupy Wall Street protest movement to deride him as “Governor 1 Percent.”

In Washington state, Democratic Governor Christine Gregoire, seeking to close a $2 billion deficit, last month asked the Legislature to let voters decide on a 0.5 percentage point increase in the state sales tax, to 7 percent, to help avert cuts that would shorten the school year and reduce support for colleges.

Mark DiCamillo, director of the Field Poll, a nonpartisan sampler of opinion in California, said surveys have shown that voters support higher taxes on the wealthy and also so-called sin taxes on alcohol and tobacco.

“It’s a lot easier for voters to say they are going to support a tax that isn’t going to affect them, if additional monies are needed,” he said

--with assistance from Peter Robison in Seattle: Editors: Pete Young, Ted Bunker

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net. Freeman Klopott in Albany at fklopott@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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