Friday, February 13, 2009

Friends of fat cats? Suddenly, 3 Dem pols look like they may be protecting rich from taxes

Juan Gonzalez

Juan Gonzalez [News]
Friday, February 13th 2009, 4:48 AM

Why won't Majority Leader Malcolm Smith and two top Senate Democrats ask New York's landlords and wealthiest residents to share the pain of these tough times with the rest of us?

Smith and Bronx Sens. Pedro Espada Jr. and Jeff Klein have suddenly emerged as key obstacles to two of the most important reforms the Legislature's Democratic majority wants to achieve this year.

The first measure would rewrite state rent laws and keep nearly a million rent-stabilized apartments - most of them located within the five boroughs - affordable to working and middle-class families.

It would do this by eliminating vacancy decontrol, which former Gov. George Pataki and the Republicans instituted back in 1997.

Early this month, Assembly Democrats overwhelmingly approved several versions of rent reform. One of those versions would eliminate the $2,000 threshold for vacancy decontrol and reestablish tenant protections for apartments with a monthly rent of up to $5,000.

The other piece of legislation, the Fair Share Tax Reform Act, has been rapidly gaining support. Better known as the "millionaires tax," it would generate $6 billion to help plug a record deficit in the state budget. In its latest form, the proposal would raise tax rates for households making over $250,000 in taxable income.

Landlords and other powerful interest groups are gearing up for a titantic battle in Albany.

Several private-equity firms are worried about rent reform. They spent billions in recent years gobbling up rent-stabilized apartment buildings - even in the city's worst neighborhoods.

Prices for real estate skyrocketed as speculators promised huge windfalls once they got rid of old tenants and jacked up rents.

Many of those plans are in shambles, and investors in highly leveraged buildings fear rent reform will make things worse.

Enter Smith, who represents a solid middle-class area of southeast Queens. Until last year, he backed more tenant protection.

But the new Smith is talking more like a Republican. He has refused to back either the reform proposals or the millionaires tax. Same for Klein, the deputy majority leader, and Espada, head of the Senate's powerful Housing Committee.

"If you raise taxes, the potential is that someone who has the income of a million or more will have the ability to be mobile [and leave the city]," Smith said.

"We cannot simply raise taxes on the wealthy to fill a budget gap, without putting money back in the pockets of middle-class people," Klein said.

"I'm a little hesitant about the millionaires tax," Espada said. He said he favors "some kind of a hybrid progressive income tax," but would not give specifics.

What Smith, Klein and Espada won't acknowledge is the tiny percentage of households in the city that earn $1 million a year, or even $250,000, after taxes.

State records show a mere 393 households in Smith's Queens senatorial district reported incomes above $250,000 in 2005. More than 93,000, or 99.6%, were below that figure.

Virtually the same is true of Pedro Espada's west Bronx district. Some 81,000 households had incomes below $250,000, and only 391 above that.

Even in Sen. Liz Krueger's district on the upper East Side, the richest in the city, only 15% of taxpayers (22,000 households) reported incomes over $250,000.

New York once boasted a "progressive" income tax system, said Sen. Eric Schneiderman, a prime sponsor of the Fair Share proposal. The more a person earned, the higher the percentage he or she paid in taxes.

TODAY, A person earning $40,000 a year is in the same top tax bracket of 6.85% as someone making $40 million. Schneiderman wants higher brackets. He wants to start at 8.25% for those over $250,000, and higher for those over $1million.

The answer to this crisis, Schneiderman and other Democrats say, is getting the few at the top who benefited in the boom years to share the pain of the bust years with the rest of us.

The new majority leader needs to get with his majority.

jgonzalez@nydailynews.com

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