New York state would end income taxes on wage earners and also make up the revenue with an employer payroll tax which’s deductible within a restructuring program that Governor Andrew Cuomo is advocating to mitigate harmful effects of the new U.S. tax code.
The new federal law restricts deductions for people’ state and local taxes — raising levies 25 percent on all New Yorkers, no matter where they reside, Cuomo said Tuesday. The federal changes could induce citizens and businesses out of country, the Democratic governor said as he presented a budget for the upcoming fiscal year.
“We’do what we can to thwart the effects of the federal program,” Cuomo stated. “That is going to be the most difficult challenge that we’t had to take on because it’s the very complex, but I have no doubt that this is the fight of New York’ s future. ”
Earlier this month, ” Cuomo said his government would file a lawsuit seeking to cancel the new federal tax legislation, asserting that it discriminates against states with high local and state taxes. In his budget speech, Cuomo for the first time fleshed out his strategy to further reduce the impact of the federal legislation by altering how the state taxes wage earners’ income.
From the tax-overhaul legislation which President Donald Trump signed last month, the Republican-controlled Congress cut income-tax prices on individuals and businesses throughout the board. However, it also limited the deductions which people can take for state and local taxes — such as income and property levies — to $10,000.
That so-called SALT provision is widely viewed as an assault on Democratic-leaning states, which often have higher taxes. On Tuesday, Cuomo called the SALT cap “ an financial missile” directed at New York, which he stated pays $48 billion more to the federal government than it has back every year. The changes will add $14 billion more to that tally this year, Cuomo said.
New York’s ‘Penalty’
“It aims New York using a penalty,” he explained. In general he said 12 states could be targeted by restricting the SALT deductions to cover different cuts. “Coincidentally, all of them have been Democratic. ”
In response, Cuomo stated his proposition, the “New York State Taxpayer Protection Act,” could remove the state income tax on wage earners. Instead, the state would levy a wage tax on the employer. By doing so, the tax burden will change from workers — who face new limits on their ability to deduct state income taxes — to employers, who might nevertheless take complete deductions for such payroll taxes. The legislation would spell out which kinds of companies would be eligible for this therapy.
“It might actually lower the accountability because it might bring the worker down to some lower income bracket,” Cuomo stated.
The plan will apply just to wage earners. For additional sources of income such as investment earnings — the state would continue to conduct its personal income tax program, Cuomo said. The state Department of Taxation will spell out more details Wednesday, he explained.
Cuomo also stated he intends to create state charitable funds for education and health care, which might enable people to find state tax credits because of their donations. This could mitigate the impact of the federal tax strategy on high-income earners, he explained. California and New Jersey officials are thinking of similar proposals.
The governor also suggested deferring tax credits for companies which get $2 million or more in credits for a single year, which could increase $300 million in state revenue, he stated. The federal tax changes — that cut the corporate tax rate to 21 percent from 35 percent — will make up for that change, he explained.
“They weren’t anticipating the tax cut; they obtained the tax cut,” Cuomo stated. “It’ll more than offset the remainder of our credits. ”