Cuomo seeks to blunt federal tax overhaul
By Chris Carola and David Klepper
Gov. Andrew Cuomo is considering big changes to the state tax code to blunt the blow of the federal tax overhaul.
The new federal tax code significantly limits a popular deduction for state and local taxes, meaning many people in high-tax states such as New York could see big increases in their tax bill.
During his State of the State address to lawmakers Wednesday, Cuomo said he wants to find a way to help reduce the increases, which he said could be as high as 25 percent for some homeowners. But in order to protect the state's bottom line, any tax cut for middle-class New York property owners would need to be offset by increases in other taxes.
“It is clear that we must protect New York taxpayers from this assault," Cuomo said. “And it's clear that we must not allow big corporations to enjoy a windfall at the expense of our middle class and our working families."
Though he didn't offer details, Cuomo has hinted he might be looking at two different taxes: a payroll tax and a tax on carried interest. The former is similar to an income tax except the employer also pays a portion; a federal payroll tax supports Medicare and Social Security now. The latter would levy a tax on certain types of investment proceeds that, under a loophole in federal tax rules, aren't subject to traditional income taxes. Cuomo referred to the loophole as a way “to give away revenue to people who don't need it."
Passing any kind of new tax will be a formidable political challenge in any year. This year, however, is an election year for Cuomo and the Legislature. Following Cuomo's speech, top Republican lawmakers said Cuomo should focus more attention on cutting existing state spending as a way to reduce taxes, while helping businesses create more jobs to expand the tax base.
“The issues really hurting New Yorkers are self-inflicted wounds," said Assembly Minority Leader Brian Kolb, an upstate Republican who is running for governor himself this year.
Details are expected when Cuomo releases his budget proposal this month.