The New York State Department of Taxation and Finance issued a Preliminary plan for instituting a Payroll Tax that would help New York Wage Earners avoid Paying State income Tax. Gov. Cuomo described the Plan as a "blueprint" that would lead to further discussion with Employers, Taxpayers, Lawmakers, and others.

The strategy was one of the highlights of Gov. Andrew Cuomo's 2019 Budget presentation, part of an effort to “thwart” the loss of Deductibility that came with December’s overhaul of Federal Tax Laws. Under the New Tax changes, passed by the Republican-led Congress and signed by President Trump, Deductions for State and Local Taxes (SALT) are capped at $10,000.

In addition to Payroll changes, Cuomo also wants to allow Homeowners to pay School Taxes in the form of a Charitable Donation, which could then qualify the Payers for an Income Tax Credit. “The main issue in the budget is about the SALT deductions,” Cuomo said.

But the concept has sparked questions from both sides of the Political spectrum. “You are making the state code increasingly complicated and for what?” said Steve Wamhoff, a Senior Tax Policy Fellow at the Institute on Taxation and Economic Policy, a Washington D.C. Progressive-leaning group that looks at Tax issues such as Fairness. Wamhoff notes that much of the effort focuses on protecting Upper-Income New Yorkers, that is those who are paying more than $10,000 in State or Local Property Taxes. He believes the State should consider additional Taxes on the Wealthy, an opinion shared by many New York Progressives but one that Cuomo hasn’t embraced.

“It simply confirms that all of the options are ridiculously complex and would be difficult to actually implement,” E.J. McMahon, Research Director for Albany’s Empire Center a Fiscally Conservative Watchdog group, said in an email. McMahon in a recent Blog commentary said that “any attempt to broadly displace the (personal income tax) with a payroll tax would be fraught with mind-bending complications.”

“These proposals could create the most complex state tax system ever, so Albany can shield high-earners from federal taxes. I can’t imagine the IRS isn’t going to have something to say about these schemes,” Doug Kellogg, Spokesman for Reclaim NY, another Fiscally Conservative group, said.

The Report from the Taxation and Finance Department lays out a Number of Options for shifting Income-Tax Costs to the Employer Payroll Tax, which appears to acknowledge the complexity of such a move. Part of the problem relates to the Progressivity of New York’s existing Income Taxes, which would have to be considered in such a change.

Other questions center on Federal Employees who live in New York and earn an estimated $300 million in Annual Wages. Then there are the 2 Million Taxpayers whose Incomes are so Low that they don’t pay any Income Taxes. And because the halting of Employee Income Taxes would be Offset by a Lower Gross Pay, McMahon has noted that “workers would have to accept what amounts to a gross pay cut, trusting that their take-home pay would not change.”

This could become complicated with Unionized Employers, either in the Private or Public Sectors where Wages are set by Contracts.

Another Proposal is to let New Yorkers continue to take Deductions on School Taxes over $10,000. Under the Plan, Homeowners could Pay into a Special State operated Charitable Fund for Education. They would get a Credit for the Donation on their State Income Tax Bills. But that brings its own complications, according to a group representing School Officials. “If the state decides to pursue this charitable donation initiative further, it should be an option for districts and not mandated, and state policymakers should involve school leaders most involved with their implementation early in the process,” Michael Borges, Executive Director of the State Association of School Business Officials said.

The Report was described as Preliminary and subject to Approval by Lawmakers. And regardless of where it ends up, the Federal Changes promise to put a dent in the pocketbooks of New York’s Taxpayers, at least those who lose out on the Higher Deductibility. “Absent changes to New York’s tax code, the law’s limitations on the deductibility of state and local taxes will cost New York’s taxpayers an additional $14.3 billion per year,” the Report concluded.

CLICK HERE to read the 37 page New York Payroll Tax Preliminary Report.









NYC Wins When Everyone Can Vote! Michael H. Drucker