The Trump tax code changes are still having repercussions throughout New York state.
There have been reports that home sales in Westchester County declined by 18 percent in the second quarter of 2018. Officials such as Gov. Andrew Cuomo are blaming the federal tax reform package, which capped at $10,000 the amount of state and local taxes that people could deduct on their federal return.
This hurt high-tax states such as New York. Cuomo on Tuesday sent an open letter to the New York congressional delegation asking them to overturn this law. In the law he says that the tax reform “weaponized the federal tax system to attack New York and other progressive states.”
“In fact, the twelve states most hurt by the limitations on state and local tax deductibility all voted against President Trump in the recent election. That's not a coincidence and that's not how democracy is supposed to work,” Cuomo said in the letter.
He also pointed out that New York taxpayers contribute $48 billion more to the federal government year than it receives back — making it the number one “donor” state in the nation. He estimates that the cap on deduction would cost taxpayers an additional $14.3 billion in 2018.
“This law threatens jobs in our state and risks undermining the progressivity of the state's tax system, the investments and services that the State provides for its residents, and the competitiveness of New York's economy over the long term,” he said.
Attorney General Barbara Underwood has also filed a lawsuit challenging the law.
It still seems like sour grapes to me. It is not the federal government’s fault that New York has high taxes. New York spends a lot of money on various programs and services including a large state workforce and billions on education and other programs.
It is difficult to have a conversation about trimming state spending because — as Democratic Assemblywoman Carrie Woerner said at a legislative breakfast last week — every dollar spent in the state budget has an interest group behind it pushing for that funding.
Perhaps the SALT deduction, which allowed people to write off the state and local taxes on their federal return, masked the true impact of New York’s high taxes.
It is the same reason why I never liked the STAR exemption. People are getting a break on their school property taxes and school districts are made whole by aid from the state, which comes from of money collected from state taxes anyway. It is just coming out of a different pocket.