ALBANY — With lawmakers on the brink of voting through more than $1 billion in cuts to the state budget over two years, Governor Paterson appears to be on his way toward emerging from a special legislative session emboldened.

Lawmakers said last night that they were prepared to cut more than $400 million from this year’s budget and some $600 million for the following year. With those cuts in hand, Mr. Paterson could be expected to tout the savings as a sign that he is a fiscally responsible steward for the state.

Since positioning himself as a champion of New York’s financial health by issuing warnings that it is headed for its worst fiscal crisis in decades, he’s seen his approval ratings jump to their highest level. The cuts are expected to reduce funding for lawmaker pet projects, known as member items, by $50 million and slice more than $50 million from higher education. Health care was expected to take the biggest budget hit, with $141 million in proposed cuts on the table during negotiations, a source said.

“What we are going to do today will translate into a billion dollars or more off of next year’s deficit. So, I think that’s a significant start and I believe it’s historic. I don’t think this has ever occurred,” the Senate majority leader, Dean Skelos, said yesterday as negotiations on the budget deal were ongoing. “We are getting there. We are closing down the loose ends.”

Mr. Paterson won praise from Republican and Democratic lawmakers for insisting on the cuts as the state faces a projected $6.4 billion budget gap next year. In the run-up to the special session, some political observers were skeptical about whether the mid-August meeting would lead to any breakthroughs.

Even with the anticipated deal, the governor faced an insurrection from the Democratic-led Assembly yesterday, which voted overwhelmingly to raise income taxes on people earning more than $1 million a year, despite his objections.

Supporters of the millionaire’s tax said its passage, by a vote of 118-24, was a sign that the increase would inevitably become law. It even won support from some members of the 42-person Republican conference.

“In addition to being the right thing to do, it’s now the politically astute thing to do,” Assemblyman Richard Brodsky, a Democrat of Westchester, said. “If you can crack the Republican minority conference in the Assembly, which is almost exclusively suburban and upstate, anti-tax Republicans — Newt Gingrich anti-tax Republicans — then there’s an overwhelming constituency for this. It’s going to happen.”

The bill, which would have to be approved by the Senate before it took effect, would raise $2.6 billion for the state, and set aside $1.7 billion of the new revenues to pay for a property tax plan also approved by the Assembly yesterday. That plan would tie tax payments to income levels and limit the amount a family earning less than $250,000 would pay each year.

The state Senate, meanwhile, approved a cap on state spending that would be expected to save $2.8 billion next year by restricting annual spending increases in the state to no more than 4%. The Senate already has passed a 4% cap on property taxes, which is supported by the governor.

The proposed cuts for health care spending faced immediate criticism last night from the health care industry. The Greater New York Hospital Association and the 1199 SEIU Healthcare Education Project issued a joint statement saying that while the anticipated agreement removed many of the hospital, nursing home, and home care cuts originally proposed by Mr. Paterson, the expected cuts would “inflict real pain on health care providers, health care workers, and the New Yorkers they serve.”

Mr. Paterson had proposed cuts of $506 million this year and more than $1 billion next year to health care, cuts the hospital industry said would force hospitals to scale back services or go out of business. The chairman of the Assembly’s health committee, Richard Gottfried, said the reductions in budget cuts to health care were “a very important victory.”

Mr. Gottfried said savings would be achieved with modest reductions in reimbursement rates to hospitals and nursing homes and by cutting premiums to Medicaid managed care plans.

“I’d rather that these cuts were not happening at all,” Mr. Gottfried, who favors taxing wealthy New Yorkers, said. But, he said, “I think health care has dodged a big bullet.”

Earlier in the day, Governor Paterson proposed legislation that would freeze medical malpractice rates this year.