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.
Officials in New York, New Jersey, California, and Maryland are going to the mat against the White House, reworking their tax codes to ease residents’ pain from new limits to federal deductions for state, local and property taxes.
E.J McMahon, founder of the fiscally conservative Empire Center, a think tank in Albany, states that this is "the kind of thing that emerges in an ivory tower with not much thought about the practicality."
If the state Legislature and Gov. Andrew Cuomo don't act, some New Yorkers would be on the hook for another $1.5 billion in tax hikes, according to state records and experts.
E.J. McMahon, founder of the Empire Center, a fiscally conservative think tank in Albany, Cuomo has called the federal tax law "a missile aimed at the heart of New York, and he’s got his own missile aimed at the same people."
Governor Andrew Cuomo wants to overhaul the state tax system by swapping state income for payroll taxes, which remain deductible under the new federal tax code.
E.J. McMahon, research director of the Empire Center, a fiscal watchdog group, notes that the loss of state deductibility could cost taxpayers an estimated $400 million.
Conservative critics contend that the complexity could be frightening to corporations that might already be wary of the state’s high-tax reputation. “It’s so complicated, it would be repellent in its own right,” said E.J. McMahon, the founder of the Empire Center for Public Policy.
For all the taxes that Congress is aiming to cut, one has surprisingly dodged the ax so far: the $14.3 billion “Health Insurance Tax,” or HIT.
Although Cuomo has said in recent weeks that he anticipates a $4 billion deficit in the coming fiscal year, E.J. McMahon of the fiscally conservative Empire Center think tank said DiNapoli’s updated estimates could indicate a shortfall of as much as $6.8 billion. The current budget totals $163 billion including federal aid.
“The comptroller’s new estimate boosts the shortfall to $6.8 billion, by far the biggest prospective blob of red ink on Albany’s books since Cuomo took office,” McMahon said.