NEW YORK STATE: Tax gimmick is headache

It’s ironic that Democrats have a record of wanting to tax those with higher earnings to pay for programs to help others. Now, as a reaction to the federal tax reform bill, Gov. Andrew Cuomo is proposing a major overhaul to the state’s tax system to protect those with higher earnings.

E.J. McMahon, Empire Center for Public Policy research director, noted in testimony before the state Legislature the federal tax reform bill’s changes to the State and Local Tax deduction most heavily impacts New York’s highest wage earners, particularly those in New York City who are already subject to the state’s temporary “millionaire tax.” Those taxpayers have already been paying more than their fair share of taxes and now will face a higher marginal income tax rate because they won’t be able to deduct as much of their exorbitant state and local taxes from their federal tax returns.

Rather than cut spending and programs, Cuomo is trying to maintain the progressive status quo with a complicated and risky end plan to move from an income tax paid for by workers to a payroll tax on employers who can still deduct state and local taxes on their federal tax returns. The move might be revenue neutral for the state, but it would surely create a ton of headaches for both large and small businesses throughout the state. At a time when New York should be lessening regulations to be more competitive, Cuomo’s response to federal tax reform is likely to be just another hassle for job creators.

The SALT deduction changes may not be as bad if the state didn’t have the millionaire’s tax to begin with or if state and local taxes weren’t so darned high in some areas of the state. If New York really wants to protect the high-earning taxpayers upon which it relies to balance its budget, the state needs to find ways to cut spending so that it can lessen the taxes those high-earning taxpayers pay.