For some politicians, a capital gains tax on real estate transactions could be a tempting source of revenue if increased costs or deficits surface.

According to the city’s department of finance, in the last three and a half years, real estate transfers in New York City would have generated a total of $4.3 billion in tax revenues if the Cuomo tax – the 10% tax on gains in real estate transfers in place in New York state from 1983 to 1996 – was still on the books in Albany.

Governor Pataki has predicted the issue will come up early in the term of the next governor. Many of those who would deal with the question if it resurfaces were active in Albany when the tax was repealed 10 years ago.

Mr. Pataki said early attempts to repeal the tax were opposed stiffly by the leadership of the Assembly speaker, Sheldon Silver, a Democrat of Manhattan, and the Democratic rank-and-file in the assembly.

The former Senate budget director, Abraham Lackman, said that when Mr. Pataki was elected and joined forces with the Senate majority leader, Joseph Bruno, Mr. Silver acquiesced. The repeal was included in the budget that was approved by the legislature in July 1996.

“It wasn’t going to cost the state anywhere near what they thought, and it was going to make money for New York City,” Mr. Lackman said. “I think the speaker was recognizing the negative impact it was having on Manhattan.”

Mr. Silver did not vote on the 1996 budget that included the repeal of the Cuomo tax. A spokesman for Mr. Silver, Charles Carrier, said the speaker had a hand in passing that budget, perhaps a sign of some tacit approval.

A spokeswoman for a Democratic candidate for governor, Eliot Spitzer, Christine Anderson, said the Democratic nominee was not considering reviving the Cuomo tax, but she would not elaborate further.

The Republican candidate for governor, John Faso, said the Cuomo tax was a “terrible disincentive for economic activity and real estate development.”

“Governor Cuomo called it the perfect tax, because it was only for millionaires,” Mr. Faso said in a telephone interview. “The fact of the matter is, those are the very people that helped to create economic activity by their investments.”

Mr. Faso noted that in the 2005 mayoral election, the Democratic candidate, Fernando Ferrer, proposed a tax on stock transfers as a source of city revenue.

“This kind of philosophy is alive and well in the Democratic Party,” Mr. Faso said. “This mentality still exists now and the supporters of that philosophy are supporting Eliot Spitzer for governor.”

Mr. Faso was a Republican member of the Assembly when the tax was repealed.

Mayor Koch, who is still a political force in the city, called the Cuomo tax “a very good tax.” Mr. Koch tried and failed to implement a similar tax in New York City the year before it was adopted in Albany.

“It brought in a lot of money, and it only affected people who were getting over $1 million. I regret that they repealed it,” Mr. Koch said.

“Development would have gone on with it,” he said, “and the state would have been richer. We would’ve gotten both.” A professor of public administration at Columbia University, William Eimicke, said he could foresee a situation where a real estate gains tax should be reinstated. “Right now if we were faced with the same need, I would rather do that than raise taxes across the board or cut services,” Mr. Eimicke, a budget director under Mayor Koch, said.

“You need to look at choices, what is available at the time. The question is: Given the need to increase taxes, what is the best option?” he said. “They were right.”

A spokeswoman for Andrew Cuomo, Governor Cuomo’s son who is running for state attorney general, declined to comment on the impact of the gains tax.

The president of the Real Estate Board of New York, Steven Spinola, who lobbied against the Cuomo tax, said a new gains tax would limit the city’s growth.

“Would people stop everything if we had a gains tax tomorrow? No. Would people slow down their decision-making and invest less? Yes, they would invest less,” Mr. Spinola said. “And they might take it to other cities and countries, where you did not have these nuisance taxes.”

Mr. Lackman compared the effect of the repeal of the Cuomo tax on the city’s real estate industry to the boom in tourism that followed the reduction in taxes on hotel rooms in the city in 1994.

“Taxes do matter,” he said. “There will always be argument of how much they matter.”

The two previous installments of this series on the repeal of the Cuomo tax are available at nysun.com. This installment concludes the series.

Also in this series:

Repeal of a Tax Ignited Boom In Real Estate, June 21, 2006
Pataki and Cuomo, 10 Years Later, Tilt Over Legacy of a Tax, June 22, 2006
The Cuomo Tax, June 23, 2006