Andrew Cuomo

How the Republican tax plan could affect New Yorkers

Gov. Andrew Cuomo has criticized the Republican tax plan advancing through Congress, which is set to come to a vote in the House of Representatives on Thursday, as “a lump of coal from Santa Trump.” New York City Mayor Bill de Blasio has blasted it, and U.S. Senate Minority Leader Charles Schumer called it “a dagger to the heart of New York.” Even several Republican members of New York’s congressional delegation have condemned the plan as being unfair to their constituents.

The bills currently under consideration in the House and the Senate differ, and neither one represents the final product, as more negotiation is needed before the tax cut package passes both houses of Congress, pointed out E.J. McMahon, research director for the Empire Center for Public Policy.

For now, there are several important provisions in the tax plans, including changes to tax brackets and the Senate’s inclusion of the repeal of the individual mandate in the Affordable Care Act as part of their bill. The Republican tax plan is also particularly relevant to New Yorkers due to provisions of the bills that would restrict – or in the Senate version, eliminate – the state and local tax deduction.

What is the state and local tax deduction?

Currently, taxpayers can deduct state and local property taxes, as well as state income and sales taxes. This deduction is heavily used in states with high property taxes such as New York, where 3.3 million people rely on the deduction, according to the governor’s office. As the broader plan includes cuts to individual and corporate tax rates, restricting or eliminating the state and local tax deduction would offset the cost of those cuts.

The bill under consideration in the House would restrict federal tax deductions claimed by New Yorkers by 71 percent, eliminating the deduction for state income taxes and allowing a deduction for property taxes up to $10,000. The Senate bill would eliminate the deduction entirely.

Even though the House and Senate bills are not the final version of the tax plan, McMahon believes the state and local tax deduction changes are here to stay.

“The starting point is, what’s in both plans? What big thing do they both agree on?” McMahon said, noting that both plans restrict the state and local tax deduction. “That particular thing is most likely to be in the final bill, and that particular thing will mostly affect the six-figure middle class of New York suburbs and New York City, and the highest income New Yorkers.”

Who supports the bill in New York?

In October, seven out of New York’s nine congressional Republicans voted against a budget resolution in the House that cleared the way for a tax bill to pass without any Democratic votes. The only two who voted for the bill were Reps. Chris Collins and Tom Reed, who have continued to support the tax plan. Rep. John Katko has also since expressed his support for the bill. Reed and Collins helped to negotiate the compromise which led to the reduction, but not the complete elimination, of the property tax deduction. They argue that the combination of lower tax rates and reducing the tax brackets from seven to four, as well as the higher standard deduction, will offset losses.

However, many Republicans in New York still believe that this compromise was not sufficient. Rep. Peter King has called the bill“bad for Long Island,” where many constituents pay over $10,000 in property taxes. Fellow Long Islander Rep. Lee Zeldin is also publicly opposing the bill, as is Staten Island Rep. Dan Donovan. Upstate, Reps. Elise Stefanik and John Faso have come out against the bill, while Rep. Claudia Tenney remains undecided.

What does this mean for New Yorkers?

Cuomo said in an open letter to President Donald Trump that even with the compromise orchestrated by Reed and Collins, the tax plan would cost New Yorkers $15 billion, with the average middle class family paying $1,715 more.

However, as McMahon noted, there is no “average” middle class family, given the diversity in incomes across the state. He gave an example of a couple in Garden City making $180,000 a year with $15,000 in property taxes. This hypothetical family would see an increase in taxes. Alternatively, he also said that a family making $65,000 to $85,000 in upstate New York would enjoy moderate tax cuts, but cautioned that the benefits of the tax plan will be primarily individual.

“Overall for the state and city, it’s a net negative,” McMahon said.

Although the House and Senate tax plans include a provision that would lower the corporate tax rate from 35 percent to 20 percent, McMahon remains skeptical that the change will be included in the final version of the bill. If the corporate tax rate is not lowered but the state and local tax deduction is partially or completely eliminated, he argued that the state will suffer, and the ripple effects throughout the economy.

“Most of the wealthiest New Yorkers, who are the cash cows for state government in particular, and also account for nearly half of the city's income tax receipts, are going to pay higher taxes with this plan,” he said. “The net effective tax price of living in New York City for the highest earners is going to rise to its highest level ever. Period. Underscore.”

If taxes become too high for these high earners, it would provide an incentive for them to leave the state – or in McMahon’s diplomatic phrasing, “change their tax domicile” –  leaving a hole in New York’s economy.

This could, indirectly, have an effect on the current debate over funding the Metropolitan Transportation Authority. New York City Mayor Bill de Blasio has proposed a so-called “millionaire’s tax,” arguing that taxing high income New Yorkers could be a source of funding for the MTA. However, McMahon said that if these millionaires are already paying higher taxes under the new tax plan, they would be hit even harder, and have more incentive to leave.

“The mayor doesn’t even seem to get it,” he said. “He has to be living in an alternative universe.”

Although McMahon and several Democratic and Republican lawmakers in New York believe the tax plan would be bad for the state, there may not be an alternative. The bill may pass the House even without the support of several New Yorkers or representatives from other states with high property taxes. This could show Republican leadership that it is possible to approve the plan without revising the state and local tax deduction provision, and certain New York taxpayers may need to adjust to a new reality of higher property taxes in the long term future.

“Once you lose the state and local tax deduction, or any significant part of it,” McMahon said, “you'll never get it back.”

Correction: An earlier version of this post incorrectly said that the House bill would allow a deduction for property taxes over $10,000. The change would allow a deduction for property taxes up to $10,000. The post has also been updated to reflect that Rep. John Faso has come out in opposition to the bill. 

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.