Madmallard
.223 Rem
Governor Cuomo’s budget proposal includes more than $1.5 billion in automatic state personal income tax hikes, affecting many of the same people who have the most to lose from the new federal limits on state and local tax (SALT) deductions.
As first noted here yesterday, the 2018-19 Executive Budget inexplicably does not include bill language decoupling the relevant section of the state personal income tax (PIT) law from the new federal tax code’s curtailment of itemized deductions, including the $10,000 combined cap on state and local tax deductions.
For most taxpayers, the impact of those changes will be offset on the federal level by a near doubling of the federal standard deduction, cuts in tax rates, a narrowing of the Alternative Minimum Tax, and an expansion of the child credit. But again, those cuts affect only the federal tax code.
New York law now allows state residents to itemize deductions on their state PIT returns if they also itemize on their federal returns. They are allowed to claim the same deductions in the same amounts listed on their federal Schedule A forms—with exceptions, most notably for state and local income taxes. The law also allows a larger standard deduction for single filers who cannot be claimed as a dependent on a federal tax return—but the new federal law has eliminated dependent exemptions.
Allowing residents to continue claiming the same itemized deductions allowed by the previous federal tax law, and breaking the link to federal dependent exemptions, would have no impact on state revenues. But because the state tax law incorporates references to the federal code, leaving it unchanged would raise state PIT revenues by a net $1.54 billion a year, according to a study of federal tax conformance issues released yesterday by the state Department of Taxation and Finance.
The potential PIT increases include the following (with page references relating to where the estimates can be found in the study):
Cuomo’s big stealth tax hike : Empire Center for Public Policy
As first noted here yesterday, the 2018-19 Executive Budget inexplicably does not include bill language decoupling the relevant section of the state personal income tax (PIT) law from the new federal tax code’s curtailment of itemized deductions, including the $10,000 combined cap on state and local tax deductions.
For most taxpayers, the impact of those changes will be offset on the federal level by a near doubling of the federal standard deduction, cuts in tax rates, a narrowing of the Alternative Minimum Tax, and an expansion of the child credit. But again, those cuts affect only the federal tax code.
New York law now allows state residents to itemize deductions on their state PIT returns if they also itemize on their federal returns. They are allowed to claim the same deductions in the same amounts listed on their federal Schedule A forms—with exceptions, most notably for state and local income taxes. The law also allows a larger standard deduction for single filers who cannot be claimed as a dependent on a federal tax return—but the new federal law has eliminated dependent exemptions.
Allowing residents to continue claiming the same itemized deductions allowed by the previous federal tax law, and breaking the link to federal dependent exemptions, would have no impact on state revenues. But because the state tax law incorporates references to the federal code, leaving it unchanged would raise state PIT revenues by a net $1.54 billion a year, according to a study of federal tax conformance issues released yesterday by the state Department of Taxation and Finance.
The potential PIT increases include the following (with page references relating to where the estimates can be found in the study):
- $44 million in added taxes from residents who will find it more beneficial to use the federal standard deduction, and thus will not be allowed to itemize on their state returns (p. 16);
- $281 million in added taxes related to the loss of miscellaneous deductions—which include, ironically enough, a deduction for union dues that the governor pushed through with great fanfare less than a year ago (p. 24);
- $400 million in added taxes from residents who can no longer deduct their local property taxes. This will mainly affect affluent and high-income owners of heavily taxed homes—the downstate suburbanites who are losing the most in federal SALT deductions (p. 21); and
- $840 million in higher taxes on 5.2 million single filers who, due to a technical quirk in the linkage between federal and state law, would lose more than half of their state standard deduction (p. 17).
Cuomo’s big stealth tax hike : Empire Center for Public Policy