Led by New York's Charles Schumer, U.S. Senate Democrats just unveiled a "Jobs and Infrastructure Plan" that would be financed disproportionately by Empire State taxpayers.
To cover the 10-year, $1 trillion price-tag of their package, Senate Democrats would reverse several provisions of the newly enacted federal tax changes—including reductions in the top income tax rate and in the Alternative Minimum Tax (AMT).
The Cuomo administration has released a few more details of its plan to propose an optional payroll tax for New York employers as a way to preserve some of the state and local tax (SALT) deductions capped under the federal Tax Cuts and Jobs Act.
Existing state regulations, along with competitive pressures, assure that health insurers will share much if not all of the benefit of federal tax cuts with their policyholders. Rather than trying to grab the money or dictate how it's spent, lawmakers should let market forces do their work.
Even before Donald Trump became President, congressional Republican tax reformers had been aiming to get rid of or at least tightly curtail the state and local tax deduction, known as SALT, that mainly benefits residents of New York and other high-tax blue states.
E.J. McMahon, research director at the Empire Center for Public Policy, a conservative-leaning think tank, stated that the tax conformity issues raised by the federal law would be the primary focus of New York tax policy in most years. However, the state and local tax deduction (SALT deduction) issue, and the related proposals to shift the state’s reliance away from the personal income tax, has drawn the lion’s share of attention.
The governor said he’d explore the feasiblity of “a major shift” of New York’s state tax burden from individuals (who will be losing federal deductions) to businesses (which will be keeping them), via a new statewide payroll tax on employers.
The idea might sound plausible on the surface. But on closer inspection, replacing even part of New York’s personal income tax (PIT) with a payroll tax would be fraught with mind-bending complications — and not very feasible at all.
For Gov. Andrew M. Cuomo, the idea must seem like sweet payback for the pains inflicted on his state by the new federal tax plan: an elegant workaround whereby New York could replace its state income tax with a payroll tax and leave Washington, not Albany, on the hook for billions of dollars in lost revenue.
But like so many white-paper plans, the proposal — while still in its larval stage — is already running headlong into a barrage of practical questions about how precisely such a switcheroo might work.
“The more you think about this,” said E.J. McMahon, a conservative economist and founder of the Empire Center for Public Policy, “the more it makes your head spin.”
MEMORANDUM TO: Governor Cuomo Members of the Legislature FROM: E.J. McMahon Research Director, Empire Center for Public Policy SUBJ: State response to federal tax reform Last month’s passage of the Tax Cuts and Jobs Act, the most sweeping rewrit...