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New Yorkers would be held harmless from the potential elimination of the state and local tax deduction and any federal tax increase under a bill introduced in the state Senate.
The bill ( S. 6951), introduced Nov. 22, would create a new state tax credit to offset any increase in federal tax liability resulting from the tax reform measures being debated in Congress.
The New York measure comes as state officials and those from other high-tax states like New Jersey urge their federal representatives to oppose elimination of the federal deduction for taxes paid to state and local governments (SALT deduction). Currently, the federal code allows people to deduct the cost of sales, income, and property taxes paid to state and local governments.
“Although it is currently unclear how the final tax overhaul will look, whatever is included shouldn’t result in a tax increase for New York’s already over-taxed and over-fined residents. If the federal government raises taxes, then it’s up to the State Government to step in and cover the increase,” according to the bill, adding that the measure “will protect every hardworking New Yorker from the uncertainty and potential negative consequences of Washington’s tax overhaul.”
“I’m not interested in whose fault it is,” state Sen. Simcha Felder (D), the sponsor of the bill, said in a statement. “Let the governor and the president fight that out. But we cannot stand by and force New Yorkers to become the collateral damage of tax reform.”
The New York bill is expected to be one of a number of measures considered by the state Legislature in 2018 to mitigate the impact of any changes at the federal level.
Under the House bill (H.R. 1), individuals could claim the deduction for property taxes up to $10,000 a year. However, the SALT deduction would be repealed temporarily under the Senate’s reform bill. Nearly all of the individual tax provisions in the Senate bill would expire at the end of 2025, leaving to future lawmakers the decision to extend the higher standard deduction and lower tax brackets. Individual tax breaks, such as the personal exemption and SALT deduction, would be available in eight years, but tax-increasing provisions, such as the alternative minimum tax and the $5.49 million individual exclusion for the estate tax, also would return.
Elimination of deductions is a way for the federal government to broaden the base of what is subject to tax and raise revenue to pay for cuts in individual and corporate rates, features of both Senate and House plans. Democratic and Republican members from higher tax states have pressed to preserve the deduction in some form.
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Text of S. 6951 is at http://src.bna.com/uuf.
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