New Yorkers' fees to go up but millionaire tax dies

NEW YORK, March 28 (Reuters) - New Yorkers likely will pay higher fees but the state's 70,000 millionaires will escape having to pay an extra $1.5 billion in income taxes, state officials said on Friday, as they rush to meet an April 1 budget deadline.

"We have opposed the increase in income taxes all along, which would have given New Yorkers the highest income taxes in the nation," a spokesman for Senate Republican Majority Leader Joseph Bruno said.

Democratic Assembly Speaker Sheldon Silver dropped -- for now -- his house's plan to raise income tax rates 1 percent for people who earn at least $20,000 a week.

"It's clear that the senate and governor are not on board. We'll continue to push for it," said a spokeswoman for Silver.

New York must close a nearly $5 billion hole in its budget, and Gov. David Paterson, who replaced Eliot Spitzer as governor on March 17, had proposed slicing spending by $800 million.

Asked how that gap would be closed, the Senate spokesman replied: "I would say it's a combination of ... mostly across-the-board cuts and there will be some minor fee increases."

He and spokesmen for the Assembly and the budget division declined to comment on any fee hikes and whether Spitzer's plan to raise $4 billion for a college endowment by privatizing the state lottery was now dead.

The framework the legislature and Paterson agreed to on Thursday evening requires them to identify $1 billion from a combination of re-estimates, cuts and revenue-raisers. But only $500 million of new spending will be approved, pushing the total budget to about $124 billion, and the increase will be held to about 4.5 percent. (Reporting by Joan Gralla; Editing by Dan Grebler)