Questions Dog Cuomo Tax Gambit

January 17, 2018. According to this article, Governor Andrew Cuomo has railed and railed against the federal tax overhaul that took effect this month. It’s an “all-out direct attack on New York state’s economic future,” he said during his State of the State address recently. Cuomo’s heavily criticized the law’s $10,000 cap on the amount of state income tax and local property tax payments. The state could overhaul its tax code to reduce reliance on personal income taxes and instead adopt a statewide payroll tax system. He tossed the idea out during his State of the State and could include more details in his budget proposal, which he was set to release Tuesday afternoon.

The governor is exploring a switch from income to payroll taxes because businesses can deduct those payments from their federal returns without worrying about a cap. Lawmakers in California and New Jersey have floated similar ideas.

 “I think it’s feasible and it’s worthy of review,” says Ron Deutsch, executive director of the Fiscal Policy Institute, a labor-aligned think tank. “That’s what we’re doing right now.”

Deutsch says he commends the governor for trying to creatively address a problem caused by the new tax laws, but his organization wants to make sure any plan doesn’t hurt lower-income workers. It also wants to make sure the state would have adequate funds to support critical programs, he says.

Deutsch and E.J. McMahon, a tax expert at the conservative Empire Center think tank, both point out that the state’s income tax is progressive. People pay different rates at different income levels, but payroll tax rates are flat.

 

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