New York leaders are railing against the latest federal tax overhaul plan, saying it would disproportionately hurt the state by eliminating the deduction of local and state taxes.
The tax plan released Wednesday includes what New York officials have warned about all year: the elimination of the law that lets New Yorkers deduct $68 billion from their federal income taxes each year.
Because New York has high taxes and high wealth compared to other states, the state and California — which deducts $101 billion a year in state and local taxes — would take the biggest hit under the plan championed by House Republicans and President Donald Trump, a native New Yorker.
Gov. Andrew Cuomo contended that the tax proposal might be illegal, saying it would equate to double taxation.
“I believe it’s unconstitutional. I believe it’s illegal, and I would challenge it as double taxation,” Cuomo, a Democrat, told reporters Wednesday afternoon. “I pay taxes to my state and local government, you then want to tax me on the taxes that I paid to my state and local government. And it is a pure tax increase.”
Even some fiscal conservatives in New York noted that while some of the proposed tax changes would help the middle class, such as cuts in federal rates and a near doubling of the standard deduction, the net outcome could be a negative for New Yorkers — both for the middle class and some of the rich, especially compared to states with lower taxes.
Any savings in New York, particularly in the New York City suburbs with high taxes, would be negligible compared with what other states may see, said E.J. McMahon, president of the Empire Center, a fiscally conservative group in Albany.
“This much is clear: A couple falling well within the middle class by downstate standards — people, in most cases, living paycheck-to-paycheck in modest suburban homes — will realize much smaller savings than their counterparts in lower-cost, lower-taxed states across the country,” he wrote.
“The net impact of the proposal will be to shift a larger portion of the remaining tax burden to households in New York and other northeastern states, as well as California.”
In April, Cuomo’s office estimated that if the deduction goes away, 3.3 million taxpayers in New York would be affected.
On Thursday, he said New York taxpayers would have to pay on average $5,300 more in federal income taxes if the plan is approved — with the biggest hit in New York City and its suburbs.
“This would really be devastating to the state of New York,” Cuomo said Thursday near Buffalo.
Some House Republicans from New York vowed to fight the elimination of the federal deduction during negotiations in Congress.
“As I’ve said from day one, eliminating the federal deduction for state and local taxes will unfairly burden the over 3 million hardworking taxpayers in New York who claim the deduction,” Rep Claudia Tenney, R-New Hartford, Oneida County, said in a statement.
“Until New York completely overhauls its tax code, removing this provision will strip primarily middle- and low-income New Yorkers of their only real tax relief.”
But Rep. Tom Reed, R-Corning, said the package would lower business taxes and those help the economy and the middle class.
“Our goal is to create good paying, high-quality jobs while cutting taxes for the middle class,” Reed said in a Facebook post. “This can be done through incentivizing the manufacturing sector and small-business growth, as well as lowering rates on businesses and investments.”
Part of Trump’s plan would be to eliminate the alternative minimum tax, which was installed in the 1960s to tax the rich. McMahon wrote that New York has the second most AMT filers in the nation after California, affecting mainly people earning between $100,000 and $500,000 a year.
But Sen. Charles Schumer said on the Senate floor Wednesday that the plan would “result in a massive windfall for the wealthiest Americans and provide almost no relief to middle-class taxpayers who need it the most.”