Most New York politicians — even some Republicans — will tell you that last year’s federal tax reform is raising taxes on New Yorkers. But, by and large, that’s just not true.
But not everyone’s a fan. Gov. Cuomo called the federal tax cut “crass,” “ugly,” “divisive” and “partisan legislating.” “Washington hit a button and launched an economic missile and it says ‘New York’ on it, and it’s headed our way,” the governor said early this year.
The governor’ biggest complaint is the new $10,000 cap on the state and local tax (SALT) deduction. Politically motivated attacks, amplified by shoddy reporting, have left most New Yorkers fearing they will wind up paying more because of the cap.
Certainly, taxpayers in New York, New Jersey and California use the state tax deduction more than most. But relatively few are affected by the cap; those affected are among the higher-income families.
And what those bemoaning the cap often neglect to mention are other elements of the reform — the doubled standard deduction and lower tax rates. Those provisions more than offset the effect of the cap for most taxpayers. As a result, 90% of them will see a tax cut or no change. By this measure, New York fares better than 26 other states.
Considering the rhetoric swirling around the tax cuts, it’s ironic that many of the areas getting the biggest tax relief, both as a percentage of income taxes paid and sheer volume of dollars, are represented by Democrats. Among the congressional districts with the biggest tax cuts, three of the top 10 are in New York. Districts from New Jersey, Connecticut and California fill out the rest of the top 10.
But the tax cuts leave no district behind. In every congressional district throughout the country, the average family will see their federal taxes drop this year.
There’s a bonus, too. The larger standard deduction will simplify tax filing for millions.
The SALT cap moves the federal tax code toward the bipartisan goal of fairness and equity between taxpayers of similar incomes. While it is true that a small fraction of New York taxpayers will see their taxes rise, it’s not because the federal tax system is somehow tilted against New York. It’s because the state’s taxes are too high. Blame Albany, not Washington.
According to the Tax Foundation, New York has the highest overall state and local tax burden in the U.S. Before the tax cuts, taxpayers elsewhere were forced to subsidize New York’s high taxes. High-income New Yorkers could write off their SALT payments, leaving other federal taxpayers to pick up the slack, essentially subsidizing Albany’s confiscatory tax policy.
Last year’s tax cuts made the federal tax code fairer and less burdensome. And the economy is growing — in New York and across the nation — as a result. Wages are rising, unemployment is close to historic lows, and for the first time, there are more jobs available than people looking for them.
Noting these benefits, some states have moved to spur even faster growth by enacting parallel tax cuts. Instead of complaining about the federal reforms, Cuomo should follow their example and encourage the legislature to enact pro-growth tax cuts as well.
This piece originally appeared in the NY Daily News