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TAX HIKE ‘THREAT TO STATE’S RECOVERY’

ALBANY – Efforts to raise income taxes risk prolonging the state’s economic slump by permanently driving a generation of laid-off bankers, traders and other top earners out of the state, say some economists and tax experts.

The concern, voiced by Gov. Paterson, Mayor Bloomberg and business leaders, took on new urgency last week when Assembly Speaker Sheldon Silver (D-Manhattan) endorsed a “millionaire’s tax” to close the state’s $13 billion budget gap.

“When your budget is based on raising top tax rates, that leaves you in a bigger hole when the market goes down,” said Kim Reuben of the Tax Policy Center.

“There’s a point when tax rates get too high and you see people moving out.”

New York City millionaires already pay the highest income taxes in the nation.

The most ambitious tax-hike plan in Albany – a $6 billion proposal – would raise the city’s top rate to 13.95 percent, or 35 percent higher than California’s 10.30 percent.

Tax hawks say the well-documented flight of Californians to Nevada, which has no state income tax, or the migration of hedge fund managers to Connecticut, which has a top rate of 5 percent, proves people will seek out lower taxes.

brendan.scott@nypost.com