STATE OF NEW YORK
GEORGE E. PATAKI, GOVERNOR
Governor George E. Pataki today announced his 1999-2000 Executive Budget will include a plan to reduce the State's income tax for nearly five million taxpayers by $600 million, reducing the tax burden on a typical middle-income family by about $150 per year by 2003.
"In 1995, we enacted an historic and long-overdue income tax cut plan that cut taxes on most New Yorkers by 25 percent, returned more than $4 billion each year to our citizens, and removed more than 450,000 lower-income New Yorkers from the tax rolls," Governor Pataki said.
"Today, we are building on that historic progress and providing even more relief to hard-working New Yorkers. When combined with our 1995 tax cut, this plan will ensure that millions of New Yorkers pay about one-third less in state income taxes than they did in 1994."
Governor Pataki also announced his Executive Budget will carry out -- on time and as promised -- the first full year of the STAR property tax cut for non-seniors, as well as the planned elimination on December 1 of the sales tax on clothing and footwear under $110.
The Governor's new income tax cut proposal, which begins in 2002 after already enacted tax cuts are fully implemented, will double the child/dependent exemption for families and increase the income threshold at which the top income tax rate is imposed on taxpayers. When fully effective in 2003, the Governor's plan will:
- Raise the income threshold at which the top rate of 6.85 percent applies to married filers to $60,000, from the current amount of $40,000; increase the threshold for head of household filers from the current level of $30,000 to $45,000; and raise the threshold for single filers from $20,000 to $30,000; and
- Double the child/dependent exemption from $1,000 to $2,000.
More than half of the taxpayers who will benefit from Governor Pataki's tax cut plan have a total family income of less than $60,000 per year. Under the plan, a family of four earning $20,000 would see its state income tax bill reduced by 40 percent and a family earning $35,000 will realize an 11 percent tax cut.
A family of four earning $60,000 will see its state income tax bill reduced by more than 7 percent. A single taxpayer earning $45,000 would see his or her income tax cut by 4 percent.
Tom and Richelle Mahar of Rensselaer joined Governor Pataki in Albany today to applaud the new income tax reduction plan. The Mahars earn $61,000 a year, have two children and own their own home. Tom has worked as a civil servant for the New York State Thruway Authority for more than seven years and Richelle is a substitute teacher. They are expecting a third child in March.
The Mahars will save $225 a year under the Governor's new income tax cut proposal, bringing their annual income tax savings when combined with the cuts passed in 1995 to $1,117 -- a 35 percent tax cut from 1994 levels.
In addition to their savings from the one-week elimination of the sale tax on clothes and footwear this week and the permanent elimination of sales tax those items under $110 on December 1, the Mahars will also realize a savings of approximately $176 this year from their STAR tax cut, which grows to approximately $530 by 2002.
That means when STAR and the new tax cut are fully implemented, the Mahars will save $755 a year in taxes plus savings from the elimination of the sales tax on clothes and footwear under $110, which could boost their total tax savings to more than $800 a year.
The New Income Tax Cut
The Governor's new income tax cut plan will be phased-in over a two-year period beginning in 2002. When the plan is fully implemented, annual savings to taxpayers will be $600 million. Under the plan, in the 2002 tax year:
- The child/dependent exemption will increase from the current $1,000 to $1,500; and
- The income threshold at which the highest income tax rate applies will rise for married filers from $40,000 to $50,000, heads of households from $30,000 to $37,500 and for single filers from $20,000 to $25,000.
When fully phased-in during the 2003 tax year, the Governor's Income Tax Cut plan will:
- Increase the child/dependent exemption from $1,500 to $2,000; and
- Raise the threshold for married filers to $60,000, $45,000 for heads of households and $30,000 for single filers.
Currently for married filers, income between $26,000 and $40,000 is taxed at 5.9 percent, while income above $40,000 is taxed at 6.85 percent. The Governor's plan would mean income between $26,000 and $60,000 would be taxed at the lower 5.9 percent rate for married filers.
"By raising the thresholds and doubling the child exemption, we putting more money in the pocketbooks of working families so they can save, spend and invest their hard-earned money as they see fit," Governor Pataki said.
The Governor's plan builds on his historic and sweeping tax cut plan signed into law in 1995 that enabled working families to keep more of what they earn. Under that income tax cut, the vast majority of New Yorkers have seen tax savings of at least 25 percent and a typical family of four earning $45,000 a year is paying better than 30 percent less in income taxes than it did in 1994. The 1995 income tax cut also removed more than 450,000 lower-income New Yorkers from the tax rolls, meaning they owed no state income tax at all. Under the Governor's 1995 tax reduction plan, the top income tax rate dropped from its prior level of 7.875 percent to 6.85 percent. Also, the income threshold for married couples rose from $26,000 to $40,000, for heads of households from $17,000 to $30,000 and for single filers from $13,000 to $20,000. In addition to the new income tax reduction unveiled by Governor Pataki today, New Yorkers will get about $2 billion in tax cuts as a result of legislation already enacted, bringing the cumulative savings since Governor Pataki took office to more than $28 billion. Tax cuts scheduled to take effect in 1999-2000 include:
- The second phase of the STAR school property tax cuts for all homeowners. Elimination of the gift tax, effective January 1, 2000. Elimination of the States added estate tax, saving New York families $400 million when fully effective. Elimination of the State's sales tax on clothing and footwear up to $110 beginning December 1, 1999. Reductions in the gross receipts tax (GRT) on energy and telecommunications utility bills. Reduction in the alternative minimum tax rate imposed on corporate taxpayers, to be fully phased in by July 1, 1999. Reduction in the fixed dollar minimum tax for small businesses, to be fully phased in by July 1, 1999. Reduction in the corporate franchise tax rate from 9.0 percent to 7.5 percent beginning July 1, 1999 with full phase-in by July 1, 2001. Reduction in the S-corporation rate differential for small businesses beginning July 1, 1999, with full phase-in by July 1, 2001.
- Phase-out of medical provider assessments by April 1, 1999.