Significant Impacts the Tax Cuts and Jobs Act on the Residents and Revenues of New York State
Letter to Governor Cuomo
I write to convey the Citizens Budget Commission’s findings about the significant impacts the Tax Cuts and Jobs Act (TCJA) will have on the residents and revenues of New York State and recommended steps needed to address these problems. These are detailed our report, Practical Policy in Challenging Circumstances: How New York State and New York City Should Respond to the Tax Cuts and Jobs Act, produced with the guidance of a CBC convened Special Committee consisting of CBC trustees, business and civic leaders, and policy experts.
While TCJA will affect many New Yorkers, CBC found the State should focus on two main problems. The first is the cap on State and local tax deductions makes New York less competitive for residents and businesses. Particularly for the highest income New Yorkers, it will widen the tax cost differential between living in New York and competing jurisdictions so much that it may encourage New Yorkers to change their legal residences and discourage potential newcomers, reducing tax revenue and business activity. The second is that TCJA could drive $1 billion in unplanned State personal income tax and $109 million in State business tax increases.
TCJA puts New York in a very difficult position. The State should respond with practical solutions to send a clear signal that New York will defend its economy by protecting its taxpayers and businesses. It is imperative that the State act quickly to protect New York and New Yorkers. New York should not allow counterproductive federal tax policy to drive unsound State and local tax policy. While it should move quickly with solutions to address immediate problems, it must also allow time for deeper analysis and experience for complex issues.
CBC’s report offers five strategies to mitigate the unplanned tax increases, blunt the SALT cap, further reform taxes, and control spending. We hope you find the report helpful.
Citizens Budget Commission