Senate Throws Cold Water on Cuomo’s Tax Changes

Gov. Andrew Cuomo introduces his new dog, “Captain”, during a conference of mayors Monday in Albany. He said he wanted to name the dog Excelsior after the state motto but was outvoted by his daughters. (Office of Gov. Cuomo)

Republicans who control the New York state Senate threw a major roadblock in front of Gov. Andrew Cuomo’s tax code restructuring proposals Tuesday, announcing their opposition to the Democrat’s plan and essentially guaranteeing it won’t make it into the state budget by its April 1 deadline.

Senate GOP Leader John Flanagan of Long Island said he was skeptical of the state tax overhaul Gov. Cuomo unveiled Monday. When asked during a Capitol news conference if Gov. Cuomo’s plans could be worked out in budget negotiations by the end of March, Flanagan replied, “no.”

Flanagan’s reaction came a day after Cuomo administration officials released the first details of his response to the federal tax overhaul that’s expected to adversely affect New York state.

The centerpiece of the Democrat’s proposal is a voluntary payroll tax that companies could adopt in lieu of the existing income tax paid by workers. The recently enacted federal tax law will raise many New Yorkers’ federal taxes by sharply capping a deduction for state and local taxes that was especially popular in high-tax states. Shifting to a state payroll tax instead of an income tax is seen as one way to reduce employees’ federal tax liability.

Take-home pay would remain the same for workers, and businesses wouldn’t see any additional taxes, according to the administration’s plan. The switch would be optional, and the changes phased in, to minimize confusion for workers and businesses.

“We are taking action to protect hardworking New Yorkers from this attack from Washington,” Gov. Cuomo said in a statement. “With these reforms to our tax code, we are doing everything we can to protect the rights and wallets of families across New York.”

Another proposal from Gov. Cuomo includes creating a tax credit for individuals who make charitable contributions to public education or health-care programs. Taxpayers making such contributions would get a deduction on their federal taxes.

Health care and education together account for nearly half the state budget.

Local governments would also have the authority to set up their own charitable funds to fund schools.

The payroll tax proposal, which would require legislative approval, prompted mixed reactions and some skepticism. Business leaders said they aren’t sure how many businesses might sign up for a new, potentially confusing tax system. And Republicans say Gov. Cuomo should focus on lowering state taxes instead of finding ways to circumvent the federal tax code.

“From the conversations we’ve had, it seems that the businesses who would take advantage of this are fairly narrow in scope,” said Zack Hutchins, spokesman for the Business Council of New York State, a leading business advocacy group. The conservative fiscal think tank Reclaim New York blasted Gov. Cuomo’s ideas as a “tax avoidance scheme.”

But Flanagan said he was particularly skeptical of the “voluntary” part of that Cuomo provision.

“We need to see the details because sometimes voluntary is not voluntary,” he said.

Gov. Cuomo’s tax overhaul plan was included in several budget amendments he released Monday. He wants the plan to be included in a final budget worked out with the Senate and Democrat-controlled Assembly. Both the Senate and Cuomo have proposed decoupling the state tax code from the federal law in order to soften the impact of the federal tax changes.

Flanagan commented during the Senate GOP’s unveiling of its 2018 “jobs and opportunity” agenda, which focuses on cutting taxes on small businesses, improving or eliminating some state economic development programs, and reducing red tape.

“The end game here is jobs, good, quality, high-paying jobs,” Flanagan said.

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