Largely blaming the new federal tax code signed into law by President Trump, New York Gov. Andrew Cuomo announced that the state is facing a shortfall of more than $2 billion in revenue after December and January saw a drop in income tax.
Since announcing his $176 billion budget plan last month, Cuomo said that the state income tax revenues have dropped by $2.3 billion in December and January, which may force the state to limit spending. The governor attributed the decline to “the federal tax legislation's elimination of full state and local tax deductibility, which disproportionately impacted New York and other predominantly Democratic states.”
"The federal administration's SALT policy is an economic civil war that helps red states at the expense of blue states, and we are now seeing the potentially devastating effect of it in the form of significantly lower tax receipts," he said. "These changes hurt our economy and make New York less competitive, and we will not stop ringing the alarm bell about this punitive policy until Congress reverses it.”
According to Cuomo’s Office, the combined state/local tax rate for high-income New Yorkers is the second highest in the country. The top one percent of taxpayer accounts for nearly half (46 percent) of State Income Tax liability. More than 95 percent of the tax increase from SALT falls on the top 20% of taxpayers - these taxpayers pay 87 percent of New York income taxes.
Cuomo said that the tax reforms encourage New York’s wealthiest to move to other states, “and even if a small number of high-income taxpayers leave the state, it would harm state revenues” and impact funding for education, healthcare, infrastructure and a planned middle-class tax cut.
State Comptroller Thomas P. DiNapoli called “the big drop in state revenues the most serious fiscal shock our state has faced in years.”
“Gov. Cuomo is right to get ahead of this issue and to fight the federal government's unfair tax policies. The disruptive impact of SALT cannot be ignored,” he said. “We are watching this revenue decline closely to determine how profound the impact will be on the budget picture. We must be wary as we move forward to finalize a state budget, and we need to shore up our rainy day funds in case a storm hits."
"The federal tax law has led to a decrease in revenues and has increased taxes for middle-class New Yorkers," Lt. Gov. Kathy Hochul added. "We will continue to fight these attacks from Washington and reject the elimination of the full SALT deduction to ease the tax burden on New Yorkers and ensure fiscal stability."
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