GOV. PATERSON and legislative Democrats have secretly agreed on an $8 billion, two- year tax hike on individuals making more than $500,000 a year that will "sunset" around the time he plans to run for election in 2010, legislative sources told The Post.
Also under intense discussion yesterday as lawmakers rushed to complete a budget by April 1 is a proposal to raise the state's 4 percent sales tax to 4.5 percent the total of which would jump to close to 10 percent in parts of the state with the addition of local sales taxes.
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The sales-tax hike, too, would sunset at the end of next year or in early 2011, legislative Democrats said.
While Paterson has repeatedly claimed he was against a "millionaires' tax" on the very wealthy and hasn't backed a sales-tax hike, the sources said he was privately backing both.
The current top tax rate is 6.85 percent for all incomes over $25,000 a year. Sources could not say yesterday what the rate would rise to for incomes over $500,000.
"Paterson has told everyone he really wants the taxes, but he wants it to appear to the public that he's against them," a senior legislative official said.
"Then, next year, when he's running, he'll say we can afford to phase them out so he can claim that he's a tax cutter."
Billions in other tax hikes proposed by Paterson in December, including huge increases in levies on insurance policies and health services, have been left in the budget for the fiscal year beginning April 1.
The budget, which is meant to close a multibillion-dollar deficit made less severe by billions of dollars in last-minute federal stimulus aid, is also expected to cut several major state programs, including Medicaid, deeper than many have expected.
The proposed cuts have angered many Democratic lawmakers, as well as the powerful unions that regularly bankroll their campaigns.
Democrats who control the Legislature and the governor's office for the first time since the late 1930s plan to ram the budget through with virtually no debate or scrutiny using special "messages of necessity" issued by Paterson that will circumvent the legally required three-day waiting period designed to give lawmakers, and the public, time to review proposed new laws, several sources said.
As lieutenant governor and Senate minority leader, Paterson strongly opposed using the "messages" to cut off debate.
A Paterson spokesman yesterday refused to say whether the governor would use the procedure to ram through the budget.
The budget plan, meanwhile, is expected to shift longstanding state commitments from wealthy, Republican-oriented Long Island school districts to poorer districts in New York City and upstate, potentially angering suburban Senate Democrats whose votes will be vital for the budget to pass.
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