Two New York state assemblymembers from Westchester County are fighting back against the new federal tax law with legislation of their own. As for tax reforms Governor Andrew Cuomo proposed in his State of the State address earlier this month, the lawmakers say they’re awaiting details but generally like the concepts.
Governor Cuomo, during his State of the State, promised legal action against the new federal tax law that caps state and local tax, or SALT, deductions at $10,000.
“We believe it is illegal, and we will challenge it in court as unconstitutional,” Cuomo said.
Democratic Assemblyman Tom Abinanti of Greenburgh agrees the state should sue.
“The tax reform law is unconstitutional because it interferes with the inherent power of the state to raise revenue through taxes on its citizens,” says Abinanti.
Republican Dutchess County Assemblyman Kieran Lalor disagrees with filing suit.
“Oh, big waste of money.”
Abinanti believes the governor should create a blue ribbon task force of tax experts to report back within a month on how to restructure New York’s tax system to include protections for taxpayers and the state’s revenue stream.
“I think payroll tax is one of the things that our blue ribbon panel has to look at. I have the sense that the governor’s not bothering with the formality of a blue ribbon panel but is reaching out to tax experts behind the scenes to accomplish the same thing,” Abinanti says. “We need to find a way to graft into our income tax system the payroll tax concept, where the employer pays the full income tax and then gets to write it off as a business expense on the federal tax returns.”
Again, Cuomo, from his State of the State.
“We are developing a plan to restructure our tax code to reduce reliance on our current income tax system and adopt a statewide payroll tax system,” Cuomo said.
Here’s Scarsdale Democratic Assemblywoman Amy Paulin.
“The payroll suggestion that the governor threw out there is very important. In fact, it was next on my list to start looking at,” says Paulin. “So the fact that they’re picking up that and I know they’re working with the Assembly staff, that is probably one of the most significant proposals.”
She says payroll tax would have to be simple and approachable by business to work.
“We’re talking about a voluntary opt-in, at least that’s what my approach would be,” Paulin says. “And so if a company wanted to offer that to someone and then pay that amount of money to New York state. It could work.”
And she has a spin on a general idea Cuomo threw out during his address.
“We’re also exploring creating additional charitable organizations so that contributions to those charitable organizations would be tax deductible,” said Cuomo.
Paulin’s bill would take a two-pronged approach. First, it would establish a dollar-for-dollar state income tax credit for charitable donations made to foundations that support state-funded institutions, such as the State University of New York. Second, it would allow taxpayers to receive credits on their property or school taxes for donations made to local foundations working alongside school districts and municipalities. She says an example of this type of foundation is the Scarsdale Schools Education Foundation. Paulin says because charitable gifts remain deductible on federal taxes, taxpayers would be able to receive a federal deduction to help offset the loss of the state and local tax deduction.
“The one thing that I didn’t hear was the ability to itemize state income tax,” Paulin says.
Paulin has a bill that that would allow New York residents to itemize their state tax return even if they do not itemize their federal returns. Meantime, Lalor, of East Fishkill, suggests another avenue to offset the SALT cap.
“And my thought was, well, I know that we have $8 billion in the budget for economic development, all these different programs which are now finally starting to get questioned. And my thought was, well, let’s take that $8 billion and take $4.8 billion of it, which would be about 10 percent of what we bring in with the personal income tax, and reduce everyone who pays personal income tax in New York state, reduce their burden by 10 percent, by taking that $4.8 billion," Lalor says. "Now, that would help everyone, whether you’re hurt by the federal tax changes or not.”
He says it would help taxpayers hurt by the changes the most. Abinanti is introducing legislation written by Brooklyn state Senator Simcha Felder to restructure New York law to keep in place the deductions and exemptions that were in effect in 2017. Lalor does not see much benefit to any of these proposals.
“If we’re concerned about economic development, and we’re concerned about the impact of the federal tax laws, let’s take that economic development money and use it to deal with the consequences of the tax laws,” Lalor says. “And that’s a very simple way. The other proposals are, from what I’ve read and what I could see, unworkable and kind of long shots. This is just very simple.”
The assemblymembers expect more detail on the governor’s tax proposals when he unveils his budget January 16.