January 18, 2017. Making state and local taxes less regressive in New York is a top priority for our organization. We are pleased to see the Executive Budget proposal include an extension of the millionaires’ tax and applaud the Governor for making this the centerpiece of his new budget. Given the great income disparities in our state, we think the Governor and the legislature should go further. We would like to see the millionaires’ tax made permanent and to have additional brackets added at the top end to make it even more progressive. This would help balance out the regressive nature of New York’s overall tax structure, where the wealthiest 1 percent pay a smaller share of their income in state and local taxes than do the bottom 99 percent.
Many of the Governor’s budget priorities are premised on the essential extension of the millionaires’ tax that provides $3.5-$4 billion in annual revenues (from less than 1 percent of taxpayers, many of whom are non-residents). These funds are critical to offset the middle class income tax reductions enacted last year, as well as the Governor’s innovative proposal that would jump-start a conversation about how to make CUNY and SUNY quality institutions that are affordable to all New Yorkers.
Given that the middle class income tax reductions only apply to families with taxable incomes over $40,000, we support the Governor’s push to enhance the Child and Dependent Care Credit (CDCC). The CDCC improvements should be made effective this year (not next year), and the Earned Income Tax Credit (EITC) enhanced to be even more effective by increasing it to 40 percent of the federal credit (currently at 30 percent of federal EITC). This would ensure that lower income families also get much-needed tax relief.
Maintaining the upper income tax surcharge is also important given the uncertainty of what might happen to funds coming from Washington. Federal funds account for more than a third of the $152 billion FY 2018 state budget, providing critical resources to fund a broad range of needs, including health care, education, child welfare, housing and the social safety net. We could lose billions in federal funds particularly if the Affordable Care Act is fully or partially repealed and millions of New Yorkers lose health insurance. New York should consider a tax recapture plan to offset federal spending reductions if such cuts accompany federal tax cuts disproportionately favoring the wealthy.