ALBANY – Assembly Speaker Sheldon Silver will abandon his controversial plan for a “millionaire’s tax” to raise billions of dollars in new revenues because of the Wall Street collapse, The Post has learned.
Silver, whose Democrat-controlled legislative branch approved the tax in August, told associates over the past few days that he has had a change of heart “because of the meltdown on Wall Street,” a source close to Silver said yesterday.
“Because of what is happening to the New York economy and to Wall Street in particular, with all the losses to so many people there, Shelly doesn’t believe this is the time to be raising a tax on the wealthy, many of whom are a lot less so,” said a source close to Silver, a Democrat whose Lower East Side district also includes Wall Street.
Silver’s decision comes at a critical time, with a special legislative session aimed at slashing $2 billion from the current state budget just over three weeks away.
In addition, Gov. Paterson says the state faces an unprecedented projected deficit of more than $10 billion for the fiscal year beginning April 1.
Many Democrats and their left-of-center allies in the Working Families Party and the labor movement, including – until now – Silver, have been urging a massive hike in taxes on the wealthy to avoid huge cuts in state programs.
Silver’s proposed millionaire’s tax, which has been opposed by Paterson and Senate Majority Leader Dean Skelos (R-Nassau), passed the Assembly by a vote of 118 to 24 in August – with nearly 20 Republicans also voting in favor.
The tax was projected to raise $2.6 billion annually by adding two new tax brackets for New Yorkers making more than $1 million a year.
It would have raised the personal income-tax rate to 7.85 percent from 6.85 percent for those making more than $1 million and boost the rate even further to 8.6 percent for those earning more than $5 million.
Opponents, noting the super-wealthy already face hefty state and New York City income taxes, said the proposed hike might accelerate an ongoing flight by the rich to lower-tax states.
Silver’s decision to abandon the millionaire’s tax comes during a Wall Street crisis that has seen some of the nation’s best-known investment banks go out of business and others get absorbed by out-of-state companies.
As a result, many budget experts and Paterson’s own Division of the Budget are predicting a dramatic reduction in income- and business-tax revenues from Wall Street, which normally account for 20 percent of all state revenue.
Paterson also noted last week that Wall Street traditionally has provided 30 percent of all state revenue during the fourth quarter of the state fiscal year, which runs from January to March, meaning that the full impact has yet to be felt.
He also predicted that the massive bonuses often paid out by Wall Street firms would be cut by far more than was anticipated just a few weeks ago, further eroding the state’s revenue base.