New York Governor Andrew Cuomo has proposed a number of options to try and protect high-earning New York residents from the new federal cap on the State and Local Taxes (SALT) paid deduction.
Democrat Cuomo’s main policy proposals are to set up a charitable contribution option for New Yorkers, which would allow individuals to donate their taxes to education or health-related programs.
The second is to create an optional payroll tax that would be paid by local employers and amount to a 5% levy on annual payroll expenses in excess of US$40,000 per employee. The plan would be phased in over three years.
To make it revenue-neutral for the state, New York residents would receive an individual income tax credit to offset any difference in their earnings.
According to Washington think tank The Tax Foundation, the proposals are designed to take advantage of the uncapped SALT deduction for businesses because, under the Tax Cuts and Jobs Act, firms can deduct the state and local taxes they have paid. Individuals are limited by an annual cap of US$10,000.
Employers would bear the full cost of their employees’ salaries and then be subject to an additional 5% payroll tax.
But the Tax Foundation warned that, although the Cuomo administration has “made some moves to suggest that they’re considering the unintended consequences, there is no indication the governor’s proposal could avoid impacting an individual’s eligibility for federal benefits under Social Security”.
It added that: “Even in the event that the IRS [Internal Revenue Service] were to bless the payroll tax idea, New York would then have to contend with the harm it could do to future social security benefits.”
Gill Oliver is a business and property journalist who has written for The Daily Mail/Mail Online's This is Money, The Press Association and many national and regional newspapers and magazines.
New York Governor Andrew Cuomo has proposed a number of options to try and protect high-earning New York residents from the new federal cap on the State and Local Taxes (SALT) paid deduction.
Democrat Cuomo’s main policy proposals are to set up a charitable contribution option for New Yorkers, which would allow individuals to donate their taxes to education or health-related programs.
The second is to create an optional payroll tax that would be paid by local employers and amount to a 5% levy on annual payroll expenses in excess of US$40,000 per employee. The plan would be phased in over three years.
To make it revenue-neutral for the state, New York residents would receive an individual income tax credit to offset any difference in their earnings.
According to Washington think tank The Tax Foundation, the proposals are designed to take advantage of the uncapped SALT deduction for businesses because, under the Tax Cuts and Jobs Act, firms can deduct the state and local taxes they have paid. Individuals are limited by an annual cap of US$10,000.
Employers would bear the full cost of their employees’ salaries and then be subject to an additional 5% payroll tax.
But the Tax Foundation warned that, although the Cuomo administration has “made some moves to suggest that they’re considering the unintended consequences, there is no indication the governor’s proposal could avoid impacting an individual’s eligibility for federal benefits under Social Security”.
It added that: “Even in the event that the IRS [Internal Revenue Service] were to bless the payroll tax idea, New York would then have to contend with the harm it could do to future social security benefits.”
Gill Oliver is a business and property journalist who has written for The Daily Mail/Mail Online's This is Money, The Press Association and many national and regional newspapers and magazines.
