(Bloomberg News) The New York Senate approved Governor Andrew Cuomo's plan to overhaul the state tax code by raising tax rates on the wealthiest residents and cutting them for millions of married couples earning less than $300,000 a year.

The Senate, where Republicans have a one-vote edge, passed the measure 55-0 in a special session. It now moves to the Assembly. The deal was announced yesterday in a joint statement by Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos.

Cuomo, 54, had vowed not to raise levies, and his opposition to extending a so-called millionaire's tax -- actually a surcharge on income above $200,000 for individual filers -- drew criticism from Democrats, unions and the Occupy Wall Street protest movement. The governor signaled a change in his stance after a midyear report showed a budget deficit of $350 million this year and a $3.5 billion gap in the fiscal year beginning April 1.

In a video statement, Cuomo said he opposes higher taxes and that New York needs to remain competitive by lowering them. Still, "to deal with this emergency, short-term we do need additional revenue," he said.

The plan would raise about $1.9 billion in new revenue, less than the $4 billion generated by the millionaire's tax, which expires Dec. 31. About $400 million will be spent on flood recovery and a youth-employment program, and the remaining $1.5 billion will be put toward the deficit, said Morris Peters, a Budget Division spokesman.

Legislative Victories

The Senate's approval puts Cuomo one step closer to another a legislative victory. During the session that ended in June, he pushed through an on-time budget that closed a $10 billion gap, an ethics package, a property-tax cap and a bill to permit same- sex marriage in the third-most-populous U.S. state.

Last week, the governor said revenue is "collapsing" amid shrinking Wall Street bonuses and job cuts in the finance industry, which accounted for more than 20 percent of wages paid by businesses in 2010. New York is one of four states, along with California, Missouri and Washington, to report midyear budget deficits, according to the Denver-based National Conference of State Legislatures.

Without the expiring surcharge, individuals who earn $21,000 are taxed at 6.85 percent, the same as someone who makes $21 million. The proposed changes would create new income brackets. The first, from $40,000 to $150,000 for joint filers, would be taxed at 6.45 percent. Those who earn $150,000 to $300,000 would have a 6.65 percent rate, while there would be no change for those making $300,000 to $2 million.

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