Taxes

Tax Foundation: NY Ranks Second To Last In Tax Climate

The Tax Foundation on Tuesday released its annual rankings of states’ tax climates, ranking New York 49th overall in the country.

The state lands between New Jersey at 50 and California, ranked 48th.

The state ranks second-to-last in individual taxes and 47th in property taxes. New York is also 43rd in sales tax.

The state does fare better when it comes to its corporate tax ranking at 7th in the country.

New York has typically ranked at the back of the pack when it comes to its tax climate in the group’s survey of U.S. states.

Updated: The Division of Budget, part of the Cuomo administration, pushed back against the ranking.

“Their obvious ideology aside, the facts are that this administration has been rigorous and effective in constraining State spending growth to the lowest level in modern history – resulting in lower taxes for all New Yorkers,” said DOB spokesman Morris Peters. “We now have the lowest corporate tax rate since 1968, the lowest manufacturers tax rate since 1917 and, with the new income tax cuts phasing in this year, the lowest middle class tax rates since 1947.”

Cuomo Escalates Rhetoric In Tax Reform Battle

From the Morning Memo:

Numerous times, Gov. Andrew Cuomo has called on the New York Congressional Delegation to reject a tax reform plan that eliminates the State and Local Tax (SALT) deduction. Cuomo took it a step farther Wednesday during a press availability in Watertown, essentially issuing an ultimatum.

“If they go with the Washington politicians and they hurt their own people, their own citizens in their own district, I’m going to travel the state and make sure people know that their taxes are going up because of a political system in Washington,” he said.

The governor’s office has already issued statistics claiming the current proposal is equivalent to massive tax hike for New Yorkers. Republicans in Congress have largely rejected any projections claiming they’re not credible since only a framework of the legislation is currently public.

“The Republican Congress people are in a box because they want to support their political bosses but they don’t want to hurt the people in their districts,” Cuomo said.

Representatives, like Tom Reed from the Southern Tier, have also refused to take a firm stance about whether they’d support a bill that eliminates the SALT deduction. The governor said the entire delegation needs to make their intentions public.

“I want to hear them say, I will vote against the bill or I will vote against the bill unless it protects New York and eliminates the prohibition on deductibility,” Cuomo said. “They have not said that.

Reed, a member of the Ways and Means Committee, has said he’d like to see the bill get through the House by early to mid-November.

Rep. Reed Defends Tax Plan

Republican Congressman Tom Reed, a member of the House Ways and Means Committee helping to draft federal tax legislation, is rejecting early analysis the framework of the plan disproportionately helps the nation’s wealthiest population. Reed said any reports claiming that kind of impact are not credible as a significant portion of the plan has not been released.

“I think what you see here are efforts by people who are so adamantly opposed to engaging in tax reform because they love the status quo and they’re protecting the status quo that they don’t want us to be successful in regards to tax reform,” he said.

According to the independent Tax Policy Center, the biggest decrease would go to people with incomes of $730,000 or more. Some tax experts point to the proposed elimination of the Estate Tax on large inheritances and reductions in rates paid by businesses as policies tailor-made for the wealthy.

The congressman said these are not fair analyses. He pointed to reference in the unveiling of the framework that top earners could be subject to an additional tax.

“It’s going to be ironic and I look forward to the day to call out the hypocrisy of these elected officials who are going to end up defending that one percent when they’ve spent an entire career saying that’s who they’re wanting to demand play their fair share,” he said.

Although Reed said holdups could cause the legislative process to trickle into next year, he believed the bill could be on the president’s desk to sign by next year.

“I believe a very realistic time-frame is through the House in October, maybe early-November, mid-November,” he said. “Finish the work there through the regular order, going through the committee process and then to the floor of the House and then get it over to the Senate some time around mid-November would be a good estimate.”

The congressman said he’s acutely aware the effect the proposed elimination of the State and Local Tax (SALT) deduction could have on homeowners in New York. He said he and others continue to argue New Yorkers pay far more to the federal government than they receive back in services – a point reinforced by a report released Tuesday from the State Comptroller’s Office.

Reed said he’s confident they can reach a compromise on that issue as the process continues.

Rep. Reed Said Tax Reform Is For Middle Class, Not The Rich

A day before, President Donald Trump was set to unveil the framework for the White House tax code reform plan in Indiana, he met with Democrats and Republicans from the House Ways and Means Committee to discuss the plan. Southern Tier Congressman Tom Reed said he was energized by Tuesday’s conversation.

“It is clear that we have the House, the Senate, and the White House in my opinion, all on the same page when it comes to that overriding framework that’s going to guide us through the final legislative process that will occur over the remainder of 2017,” Reed said.

Reed also believes the president wants legislation tailored to benefit the middle class, not America’s most wealthy. The congressman said critics who believe the GOP is doing the exact opposite are simply wrong.

“Anyone who believes that to be the case is not reviewing any of the proposals that we are advocating for or putting out as we speak and also because the legislative process has not been completed, I don’t know how anyone could come to that conclusion other than for political purposes or fear-mongering or editorializing,” he said.

A main component of the plan would be doubling the Standard Deduction. Reed estimated that would lead to 95 percent of taxpayers no longer itemizing their deductions, eliminating a burden and making the process easier for millions.

“What we’re looking at is obviously to modernize the code, to lower rates as much as possible across the board,” he said.

But Reed would not take a firm position on whether or not he would support the elimination of the State and Local Tax deduction, commonly known as the SALT deduction. He said there are many members of his party who would like to see it gone because they believe it disproportionately benefits states with higher property and sales tax rates, like New York.

Reed said his counter argument is that New York is a donor state where residents give more in federal taxes than they receive in services and pointed out those “real people” would be affected by the elimination.

Meanwhile, Democratic Congressman Brian Higgins, who is also a member of the Ways and Means Committee, said he took advantage of Tuesday’s meeting to speak out against the elimination.

“I welcomed the chance to advocate on behalf of Western New Yorkers who are fearful that the potential removal of essential provisions like the state and local tax deduction will affect their livelihoods,” he said in a statement. “I am hopeful that the President was able to listen to our ideas. It is never too late for this process to move in a bipartisan basis. Given the importance of the issue, it is something that the American people should expect.”

Last week, Higgins held a joint press conference with Erie County Executive Mark Poloncarz calling on taxpayers to reach out to Reed and urge him to protect the deduction. Reed said he’s familiar with a PricewaterhouseCoopers report they referenced which predicted eliminating SALT would cost middle-income families that took advantage of it $815 annually, even after doubling the standard deduction.

“Those numbers are concerning to me and that’s a lot of dollars that people that are making that are going out the door that I want to make sure we’re a voice to protect as we go through this process,” he said.

Reed, who is the chairman of the bipartisan Problem Solvers Caucus, said he’s been toying with an idea he believes could be a compromise.

“Can you move it to the credit side of the ledger where folks who are paying property taxes have access to a credit that comes off dollar for dollar their overall tax liability at the end of the day. You know, a deduction is only a personal reduction of your tax liability,” he said.

The congressman said as late as Tuesday afternoon, the House, Senate and White House were finalizing the framework of the plan, but it won’t include every detail. He said every debate will get its time now that the legislative process is beginning.

County Execs Sound Alarm Over Tax Reform Proposals

County executives in New York are urging federal lawmakers to not end the deduction of state and local taxes and the federal tax exemption for municipal bonds, arguing in a statement Thursday that both measures would have a negative impact on local taxpayers.

The two proposals are among a package of potential changes to the federal tax code that congressional Republicans want to achieve before the end of the year.

“Our congressional members must understand that these two actions would have a direct and negative impact on our homeowners and local governments,” said Onondaga County Executive Joannie Mahoney, president of the New York State County Executives Association.

Ending state and local deductions, in particular, could have a broad impact on high-tax states like New York and has been largely opposed by state elected officials in both parties. Meanwhile, the elimination or limits on federal tax exemptions for municipal bonds has received less attention, but could have cost local governments $45 billion in higher interests costs if it had not been in place.

“With this letter, we are asking our congressional members to put their constituents first,” said New York City Mayor Bill de Blasio. “It’s time to fight for working New Yorkers and reject the current plan for tax reform.”

Report: Tax Revenue Softens

Tax revenue for states was lower than expected in April, with the largest declines being posted in New England and Mid-Atlantic states, a report from the Rockefeller Institute of Government found.

In 11 states, collections from the personal income tax in April-May 2017 were lower than the same period in 2016.

New York had initially projected a 5.7 percent growth in capital gains last year, but ultimately revised that estimate to a 3 percentage point decline.

It’s not entirely clear what has led to the lowered revenue, though one possibility could be taxpayers shifting their income out of 2016 after Donald Trump’s election as president in order to benefit from the potential tax cuts he had pledged during the campaign.

The full report can be found here.

DiNapoli: Tax Cap Approaches 2 Percent

The allowable growth in property tax levies for local governments will be set at a 1.84 percent cap, Comptroller Tom DiNapoli’s office on Friday announced.

The calculation of the cap impacts county and town governments, as well as fire districts and 44 cities and 10 villages.

“After two years of tax growth being limited to less than one percent, inflation has crept up resulting in the highest allowable levy growth since 2013,” DiNapoli said. “This increase is offset by rising fixed costs and limited budget options. I continue to urge local officials to exercise caution when crafting their spending plans.”

The state’s tax cap has been in place since 2012 and limits the rate of year-over-year increases in the amount collected in taxes to 2 percent or the rate of inflation, whichever is lower.

In the last five years, inflation has largely been flat and has never hit the 2 percent threshold.

In the 2017-18 fiscal year, property taxes were capped for school districts at 1.26 percent.

Progressive Groups Urge Support For Taxing The Rich

A coalition of progressive and liberal organizations on Thursday backed a push to extend the millionaires tax and urged hiking taxes as well as backed by Assembly Democrats.

In a statement from a range of groups — including Strong Economy For All, The Working Families Party and Fiscal Policy Institute — the preservation of a tax rate on those who make more than $1 million is framed as fiscally responsible.

“Now is not the time to give big tax cuts to the richest New Yorkers,” the groups said in a statement. “The Senate Republican budget plan is fiscally irresponsible. Millionaires don’t need new tax cuts, and our state can’t afford them when schools and healthcare systems need funding and homelessness is at an all time high.”

Fiscal watchdogs, including the Empire Center, question whether the tax extension is necessary, however, saying the state’s finances can remain in balance if Gov. Andrew Cuomo and lawmakers find ways of curtailing spending, even while holding an overall state spending increase to a 2 percent rise.

Senate Republicans rejected the tax rate extension in their one-house budget resolution, and Majority Leader John Flanagan, too, has questioned whether the rates are needed.

But the coalition of liberal groups want Cuomo and the Legislature to go further and back a “mansion tax” on real estate transfers.

“We support the New York City Mansion Tax and the effort to help lower-income elderly New Yorkers stay in the communities they’ve been part of for decades,” the groups said.

Partnership For NYC Raises Concern Over Tax Reform

Ending itemized deductions would have a major impact on New York, according to an analysis released on Friday by the business-backed Partnership For New York City.

Federal-level tax reform that ends itemized deductions would cost New York City taxpayers alone an average of $6,607. There, the estimate value of itemized deductions is $7.7 billion. Statewide, New York taxpayers claimed $104 billion in deductions, second only to California.

And the report notes New York City provides $56.1 billion in contributions to the federal tax revenues post deductions.

Federal Tax Reform Threatens New York%27s Competitiveness – Partnership for New York City – 2017-02 by Nick Reisman on Scribd