A $14B tax increase? Cuomo’s claim 'grossly misleading,' critics say

Joseph Spector
Democrat and Chronicle
Gov. Andrew Cuomo is fighting a federal tax plan that he says will increase taxes on New Yorkers. Critics say he's conflating the figures.

ALBANY -- Speaking in Rochester on Thursday, Gov. Andrew Cuomo proclaimed that if the state does not act to address the federal tax plan, "Everybody's taxes go up 25 percent."

And earlier in the day, his budget director, Robert Mujica said the tax plan, because it limits New Yorkers' ability to deduct state and local taxes, "has increased taxes for 1.7 million New Yorkers by $14.3 billion."

Fiscal watchdogs said the claim is misleading and doesn't account for the tax breaks that most New Yorkers will get under the federal tax plan, such as lower income-tax rates, higher child deductions and a near doubling of the standard deduction.

"I think some of this rhetoric is a little overheated," said Richard Auxier, a researcher at the Urban-Brookings Tax Policy Center.

Other policy analysts went even further in their critique of Cuomo's characterizations of the federal tax plan, which he has repeatedly claimed "sends a missile to New York state."

"The governor’s use of numbers has been grossly misleading," said E.J. McMahon, founder of the Empire Center, a fiscally conservative think tank in Albany.

"He clearly wants New Yorkers to believe their taxes are going up by $14 billion, or 25 percent on average -- which is simply not true and won’t ever be true."

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SALT fight

At the heart of the debate — and the main target of Cuomo's ire — is a provision in the tax law approved by Congress and signed by President Donald Trump in December that caps state and local tax deductions at $10,000 a year.

The cap is a big deal for high-tax states like New York, particularly in New York City and its suburbs.

In Westchester, for example, the average state and local tax deduction — which can include property taxes — was $34,345 in 2015, according to a report in October by the state Comptroller's Office.

The Cuomo administration has fought back aggressively against the so-called SALT deduction limit.

Cuomo has joined with New Jersey, Connecticut and most recently Maryland in planning a lawsuit, saying the law unfairly targets high-tax, typically heavy Democratic states.

His office started a public campaign Thursday to get the law repealed.

He is also considering an overhaul of the state's income-tax code to shield residents' income from the cap — potentially through a shift to broader payroll tax and a new charitable-contribution program to fund state services.

New York's argument

Cuomo said New York already provides $48 billion more in tax revenue to Washington than it gets back.

And the tax plan, he said, will add another $14 billion — which is the amount New Yorkers, his office said, will pay in state and local taxes above the $10,000 cap, thus his contention of a 25 percent tax increase.

"Here, we're standing on a train track, and a train is coming right for us," Cuomo said Thursday on Long Island about the federal tax plan.

"The safe thing is not to stay on the tracks. If we don't change the tax code, everybody's taxes go up 25 percent." 

Mujica told reporters, though, the figures do not take into account the tax savings that most New Yorkers will receive through the other parts of the federal tax plan, such as the lower income-tax limits.

Asked what is the net impact of the total tax bill on New Yorkers, he answered, "I don’t have the net number."

But he said the point is still the same: The loss of the tax deductibility is a net negative for the state.

His office said, for example, New York represents 7.3 percent of the national tax base, but is getting just 5.1 percent of tax breaks.

Impacts reviewed

Also, New York faces a reduction in home prices — particularly downstate — because of the cap on state and local tax deductions, Moody's Investment Services has warned.

And any tax breaks will expire by 2027, Cuomo's office said.

"Everyone in the nation benefits from the reduction in the rates to taxpayers," Mujica testified before lawmakers when they questioned the $14 billion figure.

"New York, however, and a few other states are far disproportionally impacted by the elimination of state and local taxes."

Cuomo has warned that the loss of the state and local deduction may hurt the wealthiest New Yorkers the most, fearing it could cause them to leave the state and take their tax revenue with them. That would be hit on the state's coffers, leaving the rest of the residents to pick up the tab.

He said 12 states are largely footing the bill for the $1.3 trillion tax cut because of the cap on the state and local tax deductibility, saying the tax law will largely help corporations and CEOs.

"We just spent the past seven years killing ourselves to keep down spending, to keep down taxes," Cuomo said. "This wipes it all out in a day."

Opponents respond

But critics said Cuomo's argument is only looking at one facet of the tax bill, and some questioned whether his case is politically motivated: The Democratic governor is a potential 2020 presidential candidate and is seeking a third term in November.

"It’s pure political messaging by the governor," said Mike Durant, state director of the National Federation of Independent Business.

"They completely are not taking into account that most small businesses are going to get a tax cut in New York; most New Yorkers are getting a tax cut, in fact."

The state and local tax deduction cap "will really only affect high earners," said Jared Walczak, a senior analyst at the Tax Foundation, another fiscally conservative group.

Overall, most New Yorkers are getting tax break, despite the limit on state and local deductions, he said.

"This is a bill that includes trade-offs," Walczak said. 

"And it’s intended to have some broader bases and lower rates. So you lose part of your SALT deduction, but you’re gaining with lower rates and, for many families, a much expanded child-tax credit that is both larger and available to far more filers."

McMahon said Cuomo is accurate to say that Congress limited the SALT deductions for New York and other high-tax states to subsidize the national tax cuts, adding, "New Yorkers will end up paying a larger share of a reduced total federal income tax bill."

But he said it is a mischaracterization to say it will mean higher taxes on most New Yorkers.

"Even with the increase in the relative cost of state and local taxes, the vast majority of New Yorkers will be seeing their federal income taxes cut," McMahon said.

"Indeed, they are already starting to see those cuts show up in their paycheck withholding stubs."