New York State 2009-10 Budget Agreement

On March 29, 2009, Governor David A. Paterson, Senate Majority Leader Malcolm A. Smith, and Assembly Speaker Sheldon Silver announced a budget agreement designed to close the largest budget gap in state history, institute reforms that will improve the efficiency and effectiveness of state government, and stabilize New York's long-term finances by dramatically reducing future projected deficits. Some features of this budget agreement are: a temporary increase in the personal income tax rate for higher-income taxpayers, elimination of the STAR rebate program, and expansion of the nickel deposit on certain beverages to include bottled water. The budget agreement is subject to final enactment by the legislature.

Personal income tax surcharge. The budget agreement includes taxes and fee actions that will produce $5.3 billion in revenues in 2009-10. The largest increase is a temporary personal income tax surcharge for higher-income taxpayers. This will temporarily increase the marginal New York personal income tax rate for higher-income filers for a 3-year period from tax year 2009 to tax year 2011. For married couples filing jointly, the marginal rate will increase from 6.85%: (1) to 7.85% for filers with incomes above $300,000, and (2) to 8.97% for filers with incomes above $500,000. This surcharge is expected to produce $4 billion in revenue in the 2009-10 fiscal year, which is an amount that is approximately equivalent to the $4.7 billion increase in the deficit that has occurred since the passage of the 2008-09 Deficit Reduction Plan on February 3, 2009.

STAR rebate. The budget also eliminates the middle class school tax relief (STAR) rebate program as well as the corresponding enhanced New York City STAR tax credit, which will produce savings of $1.5 billion in 2009-10. However, even after this action, the STAR exemption program and New York City STAR credit will continue to provide $3.3 billion in property tax relief.

Deposit on bottles and EPA funding. The budget will expand the nickel deposit on carbonated beverages to now include bottled water. Also, once the budget is enacted, the state will retain 80% of unclaimed deposits on all beverages. Currently, 100% of unclaimed deposits are kept by bottlers. The budget when enacted will also restore the real estate transfer tax as the primary funding source for the Environmental Protection Fund providing almost $200 million in support in 2009-10.