obama-new-york-tax-231x300-8611311President Obama’s proposed cap on itemized federal income tax deductions for state and local taxes would cost New York residents $3.8 billion a year, according to a report released by Governor Cuomo’s office today. However, you’ll have to dig a little to find that number: Obama isn’t mentioned until page 11 of the 26-page document.

The opening section of the report (which is, by the way, useful and well-researched in most respects) focuses on how bad it would be for New Yorkers if the federal government were to completely eliminate the deduction for state and local taxes. However, no one in a position of authority in Washington is actually proposing such a thing. The much more more serious risk to New York is that the White House and Congress will agree to some form of limit on itemized deductions for high-income taxpayers, as Obama proposed in his budget last week (reviving a proposal he first trotted out three years ago).

For all the talk of polarization in D.C. these days, Obama and the GOP don’t actually differ much on this point. Both are willing to tightly curtail if not eliminate tax breaks at the top end, of which the state and local tax deduction is among the largest. What keeps them apart is a Republican desire to accompany any broadening of the tax base with a reduction in rates.  But if a “grand bargain” ever materializes between Obama and Speaker John Boehner, it’s not difficult to picture congressional Republicans (dominated by representatives from low-wealth, low-tax states) agreeing to a deal that targets the state and local tax deduction for the wealthiest households

Any variation of an exemption cap targeted at the top brackets would have the greatest impact on states combining large numbers of high-income payers with steeply progressive state and local income taxes — particularly New York and California. New York’s tax base alone, including commuters from neighboring states, would generate 30 percent of any added federal revenues generated by such a move, federal tax data indicate.  If the federal tax code is changed in a way that makes New York even less competitive, it will affect the willingness of people to earn income here, not just to live here. This equates to a bigger overall hit on Albany’s fiscal foundation–the highest-earning 1 percent, who this year will generate about 43 percent of the total state income tax.

Although conservatives have been gunning for the state and local deduction since the Reagan era, when its elimination was fended off by a previous Governor Cuomo, a strong case can be made for retaining the deduction on both historical and federalist grounds, and Cuomo’s report today makes that case fairly effectively. Unfortunately, it’s difficult to sympathize with a governor who issues a press release warning of a potential “double tax” just weeks after extending a supposedly temporary state  tax hike on the same people who would pay the most in added federal taxes if something like the President’s proposal is ever adopted.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Sales Tax Receipts Surge Statewide, Filling Local Government Coffers

Local governments across every region of the state raked in robust sales tax collections during the three months that ended on June 30th Read More

Remote Threat 

Remote work and a more mobile professional class will increase the speed and scope of New York's ongoing out migration. Read More

Empire State’s new budget is a bridge to nowhere

Looking ahead to an uncertain post-pandemic recovery, New York’s newly enacted state budget for fiscal year 2022 raises spending by staggering amounts that—barring an unlikely rapid return to peak 2019 economic activity in New York City—can't possibly be sustained for more than a few years. The budget is a mid-2020s fiscal disaster in the making: an incomplete bridge over a deepening river of red ink. Read More

Tax hike and huge spending increase seem likely in next NY budget

New York state today began its 2022 fiscal year without an adopted budget—which, in itself, is not a big deal. The state government can continue to pay bills and employee salaries next week if either final appropriations Read More

DiNapoli Predicts $3.8B More in State Tax Receipts

New York State's tax receipts in the current fiscal year will exceed Governor Cuomo's latest projections by $3.8 billion—still down from last year, but a big improvement over the governor's worst-case scenario—according to updated estimates from state Comptroller Thomas DiNapoli's office. Read More

With Hopes Dashed for “Blue Wave” Bailout, Cuomo Needs to Deal With Budget Shortfall

With the national election results still unclear, Governor Cuomo can no longer put off tough decisions on how to balance New York's pandemic-ravaged state budget. Read More

For State Lawmakers, Secrecy May Pay

New York state legislators may get a raise on January 1, 2021—but the people who elect them may not get to find out before voting ends next week. Read More

In Pandemic Recovery, New York’s Tax Base Is More Fragile Than Ever

New York's exceptionally wealthy state tax base is also exceptionally fragile, due to its heavy dependence on the highly volatile (and portable) investment-driven incomes of Wall Street workers and fund managers. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!