There’s an obvious irony — not to mention an obvious political motive — in Gov. Andrew Cuomo’s choice of his Republican predecessor, former Gov. George Pataki, to co-chair a Tax Relief Commission that’s supposed to recommend tax cuts for next year’s state budget.

It was 19 years ago this week that Pataki, then still a first-term state senator running for governor, unveiled a proposal for an enormous cut in New York’s personal-income taxes. His opponent, incumbent Democratic Gov. Mario Cuomo, derided the plan as a “magic act” and “a con job.”

Pataki had the last laugh — winning the 1994 gubernatorial election and, in his first budget the following spring, securing legislative approval for an income-tax cut then valued at $3.6 billion a year. By the time he left office at the end of 2006, Pataki had signed dozens of individual and business tax cuts that ultimately saved New Yorkers billions more a year.

But a portion of that tax-cutting progress has been reversed in the past four years — largely because Andrew Cuomo reneged on his 2010 campaign pledge to resist tax increases or tax-hike extensions.

Cuomo’s latest state budget enacted “new or extended revenue provisions” that will raise $5.5 billion over the next four years, according to the comptroller’s office.

These include the extension, through 2017, of a supposedly temporary 29 percent income-tax increase for individuals earning $1 million or more. While a small portion of the revenue raised by that tax hike has been used to finance small tax breaks for the middle class, the net impact was an added $2 billion-a-year tab for high-income households.

New York state’s top income-tax rate is now pegged to stay at 8.82 percent for four more years. That’s almost a full percentage point higher than the rate Pataki inherited from Mario Cuomo, and nearly two points higher than the 6.85 percent permanent rate enacted under Pataki’s tax-cut plan in 1995. Only a handful of major states have higher rates.

For New York City residents, the combined state and city rate is now 12.7 percent — and would rise to 13.3 percent under Bill de Blasio’s proposal for a city tax hike.

From an economic standpoint, the income-tax rate is important because it influences decisions to earn and invest money in New York. Higher tax rates on wages, interest and capital gains create a disincentive to earn and invest more here — which is why Pataki made a priority of across-the-board income-tax cuts when he was governor.

But Cuomo’s charge to the new tax-relief commission, which Pataki will co-chair with Democratic former state Comptroller Carl McCall, pointedly makes no mention of the state’s personal-income tax. Instead, Cuomo said yesterday he wants the panel to focus mainly on local property taxes.

Although the governor pushed through a 2 percent cap on local property-tax growth outside New York City two years ago, he now says he wants to do “even more.” This could point to some form of additional state subsidy of local property taxes, along the lines of the School Tax Relief (STAR) program enacted under Pataki in 1990s.

From a political standpoint, STAR was a smash hit that helped ensure Pataki’s re-election in 1998 and 2002.

Fiscally, it amounted to little more than a costly form of temporary pain-relief for suburban and upstate homeowners, which is why Cuomo’s cap was ultimately necessary.

Yet another program to subsidize property-tax relief with state revenues can only be paid for by perpetuating high personal-income-tax rates. During his brief remarks at yesterday’s appearance with Cuomo, Pataki was understandably careful to steer clear of substance.

Looking forward, the question is whether the former governor will allow himself to be used as cover for a “tax relief” plan that fails to initiate a faster and definitive return to the lower income-tax rates he championed for almost two decades.

There was a time when George Pataki was willing to stake his political career on the principle that reducing income-tax rates was the key to fostering greater economic growth and competitiveness for New York. We’re about to find out whether he still believes it.

© 2013 New York Post

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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