September 28, 2017
Albany, NY

Governor Cuomo Releases Analysis of the Impact of the Proposed Elimination of State and Local Tax Deductibility

TOP Governor Cuomo Releases Analysis of the Impact...

Governor Cuomo: Washington Tax Plan Imposes Double-Tax on New Yorkers

Plan Would Cost 3.3 Million New York Taxpayers $17.5 Billion

WYSIWYG

Governor Andrew M. Cuomo today released an analysis outlining the devastating impact of the Republican proposal to eliminate the federal deduction for state and local taxes paid, a deduction that has existed for more than 150 years. The analysis shows that the elimination of state and local tax deductibility will mean that 3.3 million New York taxpayers would see their federal income tax liability increase by $17.5 billion. On average, New York taxpayers will have to pay $5,300 more in federal income taxes.

 

"This latest assault on New York by Republicans in Washington is also the height of hypocrisy," Governor Cuomo said. "This plan puts corporations over people and billionaires over the middle class. And rather than cutting taxes for hard working Americans, it would tax them on the taxes they are already paying. This is an illegal double taxation that will cost New York families more than $17.5 billion, and I urge all New Yorkers to make their voices heard and tell Congress to stop this reckless plan."

 

Existing Federal law that allows taxpayers to deduct their state and local taxes from their federal taxable income is a fundamental statement of the long-standing historical right of state and local governments to raise revenues and taxpayers not to be double taxed. It has been the law of the land since the Revenue Act of 1862, which created the country's first income tax, was enacted to finance the Union effort in the Civil War, and confirmed in the modern income tax, following the ratification of the Sixteenth Amendment to the Constitution in 1913. Setting all this aside would not be equivalent to 'closing a loophole' as some have described that action; it would double tax the taxpayer, undermining states' rights.

 

Federal Tax Increase on New Yorkers from Repeal of State and Local Tax Deduction - by Income

 

FedAGI Range

 

 

 

# of Taxpayers

 

 

 

Tax Increase (in millions)

 

 

Average Tax Increase

 

 

Less than $50,000

649,718

$275

 

$423

$50,000 to $100,000

1,158,013

$1,504

 

$1,299

$100,000 to $150,000

686,506

$1846

 

$2,688

$150,000 to $200,000

319,016

$1,372

 

$4,300

$200,000 to $300,000

244,592

$1,699

 

$6,944

$300,000 to $500,000

130,149

$1,660

 

$12,753

$500,000 to $1 million

68,239

$1,878

 

$27,519

$1 million to $2 million

26,459

$1,510

 

$57,066

$2 million to $5 million

13,352

$1,675

 

$125,481

Greater than $5 million

6,206

$4,077

 

$656,988

Total

3,302,250

$17,495

$5,298

Source: New York State Department of Taxation and Finance analysis of 2010 Federal Statistics of Income (SOI)

 

The deduction for state and local taxes paid is also the most widely used benefit in the tax code. For corporations and business filers, taxes paid to state and local governments are regarded as a cost of doing business and reduced from income. Virtually all taxpayers filing itemized returns nationally claimed a deduction for state and local taxes paid.

 

The elimination of this widely-used tax deduction would hit every region in New York. New York City would bear the largest burden, seeing taxes increase by more than $7.1 billion for more than 1.1 million taxpayers. Nearly a million taxpayers on Long Island would see an average Federal tax increase of more than $4,500, and almost 600,000 taxpayers in the Mid-Hudson region would see an average increase of nearly $5,600.

 

Regional Impact of Proposed Repeal of State and Local Tax Deduction

 

Region

 

# Taxpayers ImpactedTaxpayers Impacted

Millions $ $lions

$

Average Increase

 

Western New York

134,192

$398.15

$2,967

Finger Lakes

152,067

$467.71

$3,076

Southern Tier

56,403

$164.80

$2,922

Central New York

88,650

$266.24

$3,003

Mohawk Valley

37,647

$96.12

$2,553

North Country

26,298

$66.79

$2,540

Capital Region

164,649

$508.39

$3,088

Mid-Hudson

597,952

$3,346.94

$5,597

New York City

1,100,432

$7,850.01

$7,134

Long Island

943,959

$4,329.84

$4,587

Total NYS:

3,302,250

$17,495

$5,298

Source: New York State Department of Taxation and Finance analysis of 2014 Personal Income Tax Population File

 

An increase in Federal taxes as a result of the elimination of the federal deduction will have enormous negative effects that would further harm New York including thousands of lost jobs and multibillion dollar loss in gross state product, economic activity and personal income.

 

Further, according to a report by the Rockefeller Institute of Government, New York sent $48 billion more in taxes to the federal government in federal fiscal year 2015 than it received back — a far greater "balance of payments" shortfall than any other state. The elimination of State and local tax deductibility will increase New York's already disproportionate contribution. 

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