ALBANY — Gov. Andrew Cuomo said Monday he will meet in the White House Tuesday with President Donald Trump to urge that the federal tax code be again revised to restore the full deduction for state and local taxes on federal returns.
Cuomo traced a new $2.3 billion shortfall facing the state treasury to the enactment of last year’s federal tax overhaul, which capped deductions for state and local taxes — a deduction known as SALT.
He insisted the legislation was advanced in order to “punish” high-income states such as New York, New Jersey, California and Connecticut, where the state legislatures are controlled by Democrats.
While Trump told reporters last week that he is open to the idea of considering changes to the tax plan, restoring the full SALT deduction is an idea that has failed to gain traction in Washington with the Republicans who control the influential Senate Finance Committee.
The committee, now led by Sen. Chuck Grassley, R-Iowa, released a statement observing it was “ironic” that Democrats from high-tax states maintain the tax code shouldn’t benefit the wealthy while the tax code changes they seek would do just that.
“The SALT deduction is a federal subsidy for states to raise taxes on their residents without political consequence,” Grassley’s committee said in the statement released by Michael Zona, its spokesman. “The answer to the problem is for states to lower their taxes instead of insisting that taxpayers from lower-tax states subsidize their profligate spending.”
Cuomo has been complaining about the changes to the tax code for months. Last year he threatened to work to defeat several New York congressional Republicans, including Rep. Elise Stefanik, R-Willsboro, and Chris Collins, R-Clarence, Stefanik had voted against the tax code change that drew Cuomo’s objections, saying she was concerned about its impact in New York.
Cuomo’s revelation last week that the state’s fiscal projections have been thrown out of kilter as a result of slow tax receipts has created anxiety and uncertainty among various interest groups focused on his proposed $175 billion state budget. If cuts are going to be made, they could hit one or both of New York’s top areas of spending — public schools and health care.
Cuomo’s criticisms of the tax code changes have focused on their impacts on high earners in the affluent suburbs of New York City. On Monday, he did not mention the fact the new tax code also raised the standard deduction for moderate- and low-income earners.
The governor and lawmakers are facing pressure from progressive activists to impose higher state income taxes on New York’s highest earners. Ron Deutsch, director of the labor-backed Fiscal Policy Institute, said his group is promoting three new tiers of surcharges for those earning $5 million or more, $10 million or more and $100 million or more.
Commenting on the Cuomo administration’s focus on a $2.3 billion hole, Deutsch said: “The governor is trying to tamp down any way the Legislature could add funding to the budget. So this is a bit of a scare tactic, while the Legislature wants to make (spending) additions that are long overdue. Right now he seems to be blaming SALT for everything but high blood pressure.”
To restore the full deduction, E.J. McMahon, research director for the Empire Center for Public Policy, said congressional Democrats would have to line up behind tax hikes on very high earners, something that would be rejected by Republicans and the White House.
He predicted the deduction cap will withstand Cuomo’s gripes because it raises more than $600 billion in revenues, funds needed to offset other tax cuts parceled out in the new law.
Cuomo and Trump have been in a war of words in recent weeks, with the latter suggesting several days ago that upstate residents should consider moving to states with better economies and job prospects.
Meanwhile, Cuomo, facing a growing clamor from mayors and village officials to restore $60 million in reductions to New York’s municipal aid, said he was giving the proposed cut a “second look.” He said local officials have pointed out that “even though it is a relatively small amount of money, in these tough times it is a big effort for them.”
Cuomo is expected to release revisions to his proposed budget Thursday.
© 2019 The Daily Star
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