State Assemblywoman Amy Paulin (D-Scarsdale) says she is set to introduce a package of bills aimed at helping mitigate the harm that new federal tax laws could cause many New Yorkers.
According to Paulin, the provision to cap the amount of the state and local tax deduction at $10,000 disproportionately affects residents in areas of the state with high property taxes, like Westchester– which has the highest property taxes in the country. These residents will now face an increase in federal and possibly state income taxes on top of those steep property tax bills. According to ATTOM data solutions, 73 percent of Westchester homeowners pay more than $10,000 in property taxes.
The first bill, which Paulin announced in mid-November, would allow New York residents to itemize their New York State tax return even if they do not itemize their federal returns. The categories of itemized deductions used at the federal level are also used for the New York State personal income tax.
The way the law is written now, New York State residents are prohibited from itemizing their state taxes if they do not itemize their federal taxes, Paulin told The Examiner. As well, the new tax laws will cause many NY residents to fall into the alternative minimum deduction category, Paulin said.
According to a July 2017 report from The Office of the State Comptroller, without legislation to change the State tax law, eliminating deductions at the federal level would eliminate them at the state level and potentially increase taxpayers’ state income-tax burden.
Paulin’s proposed legislation would ensure that taxpayers will still be able to itemize on their New York return, preventing them from facing a higher New York tax bill.
Paulin’s second bill, would establish a two-pronged approach. The first portion of the legislation would establish a dollar-for dollar state income tax credit for charitable donations made to foundations that support state-funded institutions, such as the State University of New York.
The second portion of Paulin’s legislation would allow a taxpayer to receive a credit on their property or school taxes for donations made to local foundations working alongside school districts and municipalities. Some examples of these types of foundations that already exist are The Pelham Education Fund or the Scarsdale Schools Education Foundation.
Since charitable gifts remain deductible on federal taxes, taxpayers would be able to receive a federal deduction to help offset the loss of the state and local tax deduction.
“We must do everything we can to lessen the damage that the new federal tax law will cause for so many New Yorkers,” Paulin said. “I have fielded dozens of calls from constituents about the new tax law and many people are considering moving, because the cost to stay here will be too high. We cannot allow that to happen. This legislation would enable taxpayers to make up for some of the losses they will experience under the disastrous federal tax law, while maintaining the revenue that the State and local school districts receive.”
Paulin said that she is working with a group of lawyers and law professors from around the country that have come together to support legislators in “blue” states like New York and California that are particularly hurt by the new federal tax legislation.
The group is working to ensure that whatever changes are made to state taxation laws cannot be challenged by the Internal Revenue Service.
The professors represent Michigan Law School, NYU School of Law, J. Reuben Clark Law School, Brigham Young University, Maurer School of Law, Indiana University, The Ohio State University Moritz College of Law, University of Chicago Law School, Fordham University School of Law, UC Davis School of Law, and UC Hastings College of the Law.
Assemblyman David Buchwald (D-White Plains), himself a tax lawyer, said, “After working the last few weeks to enable as many Westchester taxpayers as possible to pay their property taxes early, my efforts are now focused on updating the state tax code. Since the Governor will in the first instance propose changes as part of the state budget, I have offered my services to his team. I am optimistic that New York State will respond on behalf of all New Yorkers to this awful federal tax bill.”
Assemblyman Tom Abinanti (D-Greenburgh) has also called for New York to fight back. “New York must remain a progressive leader and fight back against the reactionary unconstitutional power grab which increases New Yorkers’ federal taxes and limits the state’s ability to meet the needs of the state’s diverse population,” Abinanti said in a press release.
Abinanti is asking the Governor to immediately create a blue ribbon taskforce of tax experts to report back on how to restructure New York’s tax system.
Abinanti wants the task force to consider such ideas as incorporating a “payroll tax” as a tax collecting mechanism into New York’s income tax system. Under a payroll tax system, employers – not employees – pay state taxes on their total payroll and can deduct the state taxes on their federal tax returns without any limitations.
In addition, Abinanti is introducing legislation drafted and introduced by State Senator Simcha Felder to restructure New York law to keep in place the deductions and exemptions that were effective in 2017.
Abinanti is also calling for the State to bring a court challenge to the Federal “tax reform” law as unconstitutional because it interferes with the inherent power of the State to raise revenue through taxes on its citizens. “The Federal “tax reform” law taxes monies, which belong to New York State,” he said.