Tag Archives: SALT

Education, New York State politics, Tax Reform, Taxes

Governor Cuomo Holds NYS Budget Hostage Without Permanent Property Tax Cap; I Object

Voting on a school bond referendum, Great Neck, Long Island. New York State’s property tax cap removes local control over spending for education and local services including parks and libraries © Karen Rubin/news-photos-features.com

By Karen Rubin, News& Photo Features

New York State Governor Andrew Cuomo has said he won’t sign the state budget unless it makes permanent the property tax cap.

“The highest tax in the state is the property tax and it is a killer,” Governor Cuomo said.”We want to reduce economic pressure on families by making sure government is not aggravating the problem with increased expenses. We’re going to cut your state income tax and we’re going to cap your property taxes so you know it’s not going higher than 2 percent. And I will tell you this as sure as I am before you today: if we do not have the permanent property tax cap in that state budget, this hand will never sign that state budget until it’s in there.”

From the very beginning, I have objected to this trampling off local control with an arbitrary and unreasonable constraint designed to hamstring and ultimately destroy local governments. Cuomo’s original intent was to force school districts and other local governments to cannibalize their reserve funds; the second was to force consolidation and dissolution of local governments and the third was to use local taxes as the bogeyman, so politicians could appear to be on the side of taxpayers.

Of course the property tax is the largest state tax and of course school taxes are the largest component. Something has to be “largest”. What should be? But local property taxes are spent where they are used, and local people have the greatest ability to participate in spending decisions. In fact, school and library taxes are the only taxes we taxpayers directly vote.

What the property tax cap does, though, is remove local control. Communities should have the right to decide if they want to improve their schools or parks. The property tax cap which basically keeps the annual increase to 2% or the rate of inflation whichever is less says: we don’t want any growth or improvement or new investment in your community. We want the status quo, and if that means deterioration, so be it. (Little known fact: the property tax cap incentivizes bonding because the debt service isn’t counted toward the cap.)

Somehow, and fairly ingeniously I think, the Great Neck Public School district has managed to continue to be among the best in the country and still average only 1.8 percent increase in the tax levy since the property tax cap was implemented in 2012, despite increasing enrollments and unfunded state mandates. This year, though, through the complicated formula, the school district could have raised taxes by 4.09 percent and still fall within the cap, is only seeking 1.94 percent increase. .

I resent the property tax cap by which the Governor and state legislators can declare themselves champions of reducing or controlling taxes.

But here’s the thing: New York State’s property taxes are not the highest in the nation; Nassau County’s taxes are not the highest; and both of these do not take into account that Long Island and New York’s incomes and our housing values are higher.

According to a survey by Wallethub, a financial services company, New York State ranks 8th (not first) in property taxes. New York ranks 43rd in its real estate tax rate, at 1.68 percent. You know which states are higher? Nebraska (1.80), Texas (1.83), Vermont (1.83), Wisconsin (1.94), Connecticut (2.07), New Hampshire (2.20), Illinois (2.31), and New Jersey (2.44) (See the study: https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/)

Even so, do you want to be Alabama, which is #2 on the list for lowest taxes, where the median home value is $132,000 and the tax is $558 (0.42%), or Louisiana, #3, where the median home value is $152,900 and median tax is $795 (0.52%)? Louisiana ranks 51st in health care, Alabama is 48th. New York is 17th (fourth most physicians per capita)

USA Today ranks New York’s public education 9th noting, “Between 2003 and 2015, the achievement gap between eighth graders living in poverty and their wealthier peers narrowed by the largest amount of all states…Annual public school funding totals $18,665 per pupil in New York, the third highest expenditure of all states.” (Top three are Massachusetts, New Jersey and Vermont). Alabama ranks 43rd (14th lowest in public school spending at $10,142). Louisiana is 46th, Mississippi is 48th.

Yes, total taxes are high: New Yorkers spend 17.07 percent of income on taxes, second highest after Connecticut (17.65 percent). But New York State is spending billions on a 21st century infrastructure and racing toward 50:50 clean energy by 2030. This is where I want to live. So do 20 million others, a number that is increasing, even as unemployment rates are at the lowest ever and the number of jobs is at an all-time high.

We pay a lot in taxes because our incomes are higher and our housing values are higher, what is more, we get more for our money, making for a higher quality of life.

The states that don’t charge an appropriate amount of state and local taxes – that is related to the cost of providing services and public investment – depend on federal handouts. New York is one of 11 states that send more money to the federal government than it gets back, in fact the #1 donor state, sending $36-$48 billion more to the federal government than it gets back. Alabama is 4th “most federally dependent state”; Louisiana is 10th.

New York sends the second highest amount in federal taxes, $133 billion (California sends $227 billion), and is fourth in the average amount of federal taxes per adult ($8,490), behind Connecticut $10,279), Massachusetts ($9,445), and New Jersey ($8,811).

(Here’s an idea: New York should do what tenants do in a landlord dispute and put that $36 billion into escrow until the SALT deductibility issue is fixed.)

But we shouldn’t be punishing our localities because of the criminality of Republicans to use the tax code as political weapon – according to State Comptroller Tom Dinapoli, the SALT deduction cap has driven down tax receipts by $2.3 billion, as wealthiest New Yorkers choose other places for primary residency.

But the tax cap is also a political weapon.

The larger objective is to eliminate local municipalities entirely – to force villages to consolidate into towns, towns into counties, school districts into larger school districts. But the fallacy in that is all that it saves is a few administrative positions. Villages and school districts already have cooperative purchasing, mutual aid; school districts even cooperate on transportation where feasible. Our school district spends 4 percent of its budget on administration, the lion’s share, 75 percent, on instruction (12 percent on building, grounds & capital projects, 6 percent on transportation). (To see where your schools spend every penny, come to Great Neck South High School this Saturday at 9:30 am for the line-by-line budget review.)

The state boasts that since implementation the tax cap has “saved” taxpayers $24.4 billion statewide – that works out to $1000 per capita, divided by 7 years, or $142 a year. I’m not sure that’s worth giving up local control.

But just as Cuomo and the Congressmembers decry Trump’s disparity in federal spending for blue states versus red states and the attack on state control over its ability to raise revenue and spend, it is the same thing with local spending: there is gigantic  disparity in the level of state aid to school districts, with the result that New York City only has to raise 50 percent of its school budget from property taxes, while Great Neck, which gets just 4 percent from the state, has to raise 95 percent through property taxes. Here’s another measure: Roosevelt, with 3270 enrolled students, gets $53 million in state aid; Great Neck, with 6399 enrolled students, gets $10 million – the difference made up from property taxes. That’s just the way it is.

What the property tax cap means is that virtually all Great Neck’s school spending is governed by the cap; other districts have much less that is controlled by the tax cap.

The responsibility for determining if our elected representatives are properly handling our tax appropriations is on the community, not an arbitrarily selected cap enshrined in law.

We see what our school taxes (and park and library and sewer district) pay for and I don’t want the state – or some politician looking to score points – deciding we can’t have low class size or a robotics club or a fencing team or an opera performance (Great Neck South High marks its 50th anniversary full-scale opera production, April 12). This community has decided these things are just as important to our district’s mission of helping every child fulfill their full potential as cramming the latest incarnation of ELA and math or operating school buildings as if they were prisons. Our mission has been to instill a love of life-long learning. And the investment this community has made in public education has brought solid ROI day after day.

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© 2019 News & Photo Features Syndicate, a division of Workstyles, Inc. All rights reserved. For editorial feature and photo information, go to www.news-photos-features.com, email [email protected]. Blogging at www.dailykos.com/blogs/NewsPhotosFeatures.  ‘Like’ us on facebook.com/NewsPhotoFeatures, Tweet @KarenBRubin

Constitution, New York State politics, States Rights, Tax Reform, Taxes

New York Leads Coalition of States Suing Federal Government Over Tax Law’s Lost SALT Deductions

Governor Andrew Cuomo announced a lawsuit by NYS, Connecticut, Maryland and New Jersey against the United States, the IRS and Treasury Secretary Steven T. Mnuchin over the constitutionality of limiting deductability of state and local taxes (SALT) which they charge is politically motivated © Karen Rubin/news-photos-features.com

By Karen Rubin, News & Photo Features

Governor Andrew M. Cuomo and Attorney General Barbara D. Underwood today filed a lawsuit to protect New York and its taxpayers from Washington’s drastic curtailment of the State and Local Tax (SALT) deduction. The lawsuit, which was joined by Connecticut, Maryland, and New Jersey, argues that the new SALT cap was enacted to target New York and similarly situated states, that it interferes with states’ rights to make their own fiscal decisions, and that it will disproportionately harm taxpayers in these states.

Accusing the federal government of engaging in a host of un-American actions – ranging from Zero Tolerance for immigrants seeking asylum, to pushing oil and gas drilling off coasts, to the failure of the Trump Administration to sufficiently protect elections and critical infrastructure against cyberattacks by Russia and other foreign adversaries- he cited the tax reform act’s SALT provision as “un-American.”

“Put aside the philosophy and the top 1 percent getting 80 percent of the benefits, the so-called SALT provision was un-American. What you did was you divided the states, you penalized the democratic states.”

In a phone conference call with the press, Cuomo said that the lawsuit is being filed in the district court of the Southern District of New York, and seeks declaratory judgment that it is unconstitutional and injunctive relief.

“There are three causes of action that the lawsuit will lay out. The first one is that it’s a violation of the Tenth Amendment which was ratified in 1791. The Tenth Amendment prohibits the federal government from invading the sovereign tax authority of the states. Remember, the founding fathers who they loved to quote, these are co-equal sovereign the federal government and the states. That was the basis of the Constitution.

“And the Tenth Amendment prohibited the federal government from invading a state’s tax authority. And that’s what they did by their own admission. Secretary Mnuchin said, the purpose of the law was ‘to send a message to the state governments that they have to get their budgets in line.’ Ted Cruz said, ‘we want to get states to lower their taxes.

Paul Ryan said the same thing. This was their attempt to manipulate state governments.

The second cause of action is that it’s a violation of the 16th Amendment that was ratified in 1913, which states the federal government may not exercise its power to tax individual incomes without providing for deduction of state and local taxes. Alexander Hamilton was cited: “the individual states would under the proposed Constitution retain an independent and uncontrollable authority to raise revenue to any extend of which they may stand in need. By every kind of taxation except duties on imports and exports.” James Madison said, “the state’s status as co-equal sovereigns provided security against interference from the federal government.”

The third cause of action is a violation of Article 1 Section 8 of the Constitution that says, ‘the Congress has the power to lay and collect taxes, duties, impose excises to pay debts, and provide for the common defense and general welfare, but it may not use its tax and spending authorities to exert a power akin to undue influence over the states or coerce the states into adopting policies preferred by the federal government.’ That goes back to case law to 1937.

Cuomo cited Abraham Lincoln when he passed the first federal income tax—the Revenue Act of 1862— “state and local taxes shall first be deducted to determine a taxpayer’s liability for the federal income taxes.” Justin Morrill in 1862, stated”‘as a matter of simple logic, the deduction is necessary to avoid both double taxation and the principle of federalism.” It also goes to the principle of federalism.

“This is their political attempt to hurt Democratic states,” Cuomo stated. “It is totally repugnant and hypocritical of the fundamental conservative ideology which they preach—the limited federal government, respect state rights. This tramples on their own theory. And it is politically motivated. And it was politically targeted. Steven Moore, the conservative economist who advised the Trump campaign, said the Republican tax bill represents death to the Democrats.

“This is not what our Founding Fathers intended. They did not intend for the federal government to manipulate or politically retaliate against states. It’s violative of the fundamental relationship between the federal government and the states. It is un-American, like what the president did with Putin yesterday, like what they did in Puerto Rico, like what they’ve done on immigration, like what they’ve done on trampling women’s rights. It is un-American. Not just repugnant to this state. Repugnant to the Constitution and the values of the American people.”

The 2017 federal tax law, “which resulted from a hyper-partisan and rushed process,” drastically reduced the deduction by capping it at $10,000. An analysis by the New York State Department of Taxation and Finance shows that the cap will increase New Yorkers’ federal taxes by $14.3 billion in 2018 alone, and an additional $121 billion between 2019 and 2025. As set forth in the complaint, the law flies in the face of centuries of precedent, which establishes constitutional limits on the federal government’s ability to use its tax power to interfere with the sovereign authority of the states.

For the entire history of the United States, every federal income tax law protected the sovereign interests of the states by providing a deduction for all or a significant portion of state and local taxes. This uninterrupted history demonstrates that the unprecedented cap on the SALT deduction is unconstitutional, as the lawsuit notes. This new, drastic curtailment of the SALT deduction has both the purpose and effect of harming New York, other similarly situated states, and their residents. Among other things, the new cap will depress home prices, spending, and business sales, and result in slower growth for the New York economy and fewer jobs.

Countering the impression that New York is the highest taxed state in the country, Cuomo said, “The large tax in New York is not state income tax, it’s local taxes – that’s what they are targeting. We have people who pay more in property ax than income tax – if those jump 30% after we capped them with first proper tax cap in history, you will see home values go down, real estate values come down, because it will make this jurisdiction must more expensive, and there may be people right on margin. This is not a theoretical political argument, this is real life.

“Ask your neighbor if property taxes go up 30 percent, what will you do? That’s why we did the property tax cap in first place – 2% year over year – this would be 30 percent bump in property taxes, and if you see real estate values come down, we will have a problem with banks, funding for school districts, and have potential devastating consequences. That’s why wanted to move on expeditious basis.

“This state has been fiscally responsible. That’s undeniable. Our credit rating up, spending increases are at record lows, efficiency up. This is a different point: it’s not for fed government to determine local taxation. That is fundamental Constitutional point.

“We think they are doing it out of political intent. If they want to talk about reduce taxes, give us back the $48 billion they take from us – we are the highest Donor State in the nation. We have been since Moynihan railed against it. We give them $48 billion more than we get back. If you really want us to reduce taxes, give it back and I will reduce taxes.

“They set up two sets of rules,” Governor Cuomo asserted, “One for Republican states, one for Democratic states. If we can’t deduct, state and local taxes [effectively] go up 30 percent. We depend heavily on property taxes to fund local governments.”

The lawsuit, filed today in the U.S. District Court for the Southern District of New York, was led by Attorney General Underwood and joined by the Attorneys General of Connecticut, Maryland, and New Jersey, is against the United States, the IRS and Treasury Secretary Steven T. Mnuchin as defendants.

Cuomo held out the possibility of other states, such as California, joining the suit. “We are forming a coalition, but time is of the essence.”

“New York will not be bullied. This cap is unconstitutional – going well beyond settled limits on federal power to impose an income tax, while deliberately targeting New York and similar states in an attempt to coerce us into changing our fiscal policies and the vital programs they support,” said Attorney General Underwood. “We will not allow partisans in Washington to hurt our people or interfere with our policies. We’ve filed suit against this unconstitutional attack on New York and our state’s fundamental rights — because we won’t stand by and let Washington pick the pockets of New Yorkers.”

“It was a number and a tax selected to effect what they wanted,” Cuomo charged. “You think it was a coincidence that it impacted 12 states, all Democratic, all states Trump lost, all that don’t have Republican representative in Congress? .. That puts democratic states on different footing. That’s why I’ve said this is economic civil war – red versus blue, Democratic versus Republican, and penalizing those states. But these are co-equal sovereigns. The federal government can’t do whatever want. It has a right to tax, and we have right to tax, I can’t interfere with the federal right to tax, and the federal government can’t interfere with our right to tax, and where they drew this line, arbitrary, because it had the desired effect.”

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© 2018 News & Photo Features Syndicate, a division of Workstyles, Inc. All rights reserved. For editorial feature and photo information, go to www.news-photos-features.com, email [email protected]. Blogging at www.dailykos.com/blogs/NewsPhotosFeatures.  ‘Like’ us on facebook.com/NewsPhotoFeatures, Tweet @KarenBRubin

Governor Andrew Cuomo, Tax Reform, Taxes

Governor Cuomo Signs Bill to Protect New York Taxpayers from Federal Tax Increases

Governor Andrew M. Cuomo signed legislation aimed at mitigating against the federal tax law which limits deductibility of State and Local Taxes (SALT) which will cost New York taxpayers $14.3 billion. The plan includes an optional payroll-tax system, new funds for charitable donations and de-coupling from the federal tax code © Karen Rubin/news-photos-features.com

Enacted Budget Includes Optional Payroll-Tax System, New Funds for Charitable Donations, and Legislation to De-Couple from the Federal Tax Code – Summary of Reforms Available Here

 Coordinated Response Provides Alternatives to the Devastating Federal Assault; SALT Limitations Cost New York Taxpayers $14.3 Billion

Governor Andrew M. Cuomo today recognized Tax Day with the signing of legislation to protect New Yorkers from tax increases brought about by the federal tax reforms. These changes to the state tax code will help preserve New York’s economic competitiveness and protect state and local tax deductibility – a basic tenet of tax law that has been part of the modern federal income tax since it was created. The legislation provides new options for tax deductible charitable donations, creates a new Employer Compensation Expense Program so that employers can help their employees maximize deductibility, and decouples the state tax code from the federal tax code, where necessary, to avoid state tax increases brought solely by increases in federal taxes.

“New York will not stand idle while the federal government takes aim at the economic heart of our communities and takes from the hardworking men and women of this state to benefit this country’s wealthy and corporations,” Governor Cuomo said. “This bill ensure protections for New Yorkers against Washington’s targeted attack and we will continue to lead this fight and do everything we can to protect the rights and wallets of families across New York.”

The legislation signed today enacts a series of reforms to the New York State tax code designed to protect New York residents from the adverse impacts of the recently enacted federal Tax Cuts and Jobs Act. These changes follow a report issued by the Department of Taxation and Finance in January 2018 that outlines several measures for the state to consider in order to mitigate these negative impacts. After further study and extensive consultation with experts from state and local government, academia, and the private sector, the proposed reforms were found to be viable options for protecting New Yorkers and were included in the Executive Budget and, ultimately, passed by the legislature. Specifically, the FY 2019 Budget takes the following steps:

  • Promotes State Charitable Contributions to Benefit New Yorkers: The FY 2019 Budget creates a new state-operated Charitable Contribution Fund to accept donations for the purposes of improving health care and public education in New York State. Taxpayers who itemize deductions may claim these charitable contributions as deductions on their federal and state tax returns. Any taxpayer making a donation may also claim a state tax credit equal to 85 percent of the donation amount for the tax year after the donation is made. Taxpayers may also make qualified contributions to certain not-for-profit organizations for specified purposes. 
  • Authorizes Local Government to Establish Local Charitable Funds: The FY 2019 Budget authorizes local governments to establish charitable gift reserve funds and to offer real property tax credits to incentivize contributions to these new local charitable funds. Under the law, such funds may receive unrestricted charitable contributions for the purposes of addressing education, health care, and other charitable purposes. This is an optional program available to counties, cities, towns, villages and school districts. Local governments and school districts may also establish charitable funds and offer real property tax credits to incentivize contributions to these new local charitable funds. These funds will help support vital government activities while also helping preserve the tax deductibility that our tax system was built on.
  • Establishes the Alternative Employer Compensation Expense Program: The FY 2019 Budget creates new ways for employers to help their employees with their federal tax bill.  While Federal tax reform eliminated full state and local tax deductibility for individuals, businesses were spared from these limitations. Under this program, employers will be able to opt-in to a new Employer Compensation Expense Program structure. Employers that opt-in will be subject to a 5 percent tax on all annual payroll expenses in excess of $40,000 per employee, phased in over three years beginning on January 1, 2019. The progressive personal income tax system will remain in place, and a new tax credit corresponding in value to the ECEP will cut the personal income tax on wages and ensure that State filers subject to the ECEP will not experience a decline in take-home pay. The program is designed to be revenue neutral for the state. Employers would also not be adversely impacted, but they’d be giving their employees the opportunity to reduce their federal taxes.
  • De-Couples from the Federal Tax Code: The state tax code is closely aligned with the federal tax code. This legislation decouples the state tax code from the federal tax code, where necessary, to avoid more than $1.5 billion in State tax increases brought solely by increases in Federal taxes.

The new federal law disproportionally and adversely impacts New York State, which already sends $48 billion more each year to Washington than it receives in federal dollars. According to a recent report released by the State Department of Tax and Finance, the elimination of full SALT deductibility alone will cost New York an additional $14.3 billion.

“These reforms to our State tax code are the result of collaborations between state agencies, working with many tax professionals, businesses, and experts,” State Budget Director Robert F. Mujica, Jr. said. “This legislation will protect New York’s taxpayers, our State Budget, and our economic competitiveness.”

Westchester County Executive George Latimer said, “In Westchester County most residents pay more than $10,000 a year in taxes. These taxes are for schools, local government and state government. The last federal budget robbed Westchester – and our residents’ way of life was threatened. I want to thank Governor Cuomo for this creative plan to help county taxpayers, and Legislators for recognizing how imperative this issue is. We support it, and will do everything in our power to implement it.”

“Today is tax day, and New Yorker’s will again send billions more to Washington than our state will get back in the form of federal funding. As a sovereign state, it is critically important that we do whatever we can to protect the income of our taxpayers, and we applaud Governor Cuomo and state legislators for advancing legislation to do just that,” New York State Association of Counties Executive Director Stephen J. Acquario said,

New York State Conference of Mayors Executive Director Peter A. Baynes said,

“NYCOM greatly appreciates Governor Cuomo’s proactive leadership in offering an option to mitigate the harm inflicted upon New York’s communities and their residents with the new cap on state and local tax deductions. Working collaboratively with NYCOM and other groups, the Governor and the State Legislature have enacted viable options for New Yorkers to avoid increases in taxes, decreases in home values, and reductions in essential municipal services. We look forward to working with the Administration to successfully implement this program.”

These changes to the state tax code are part of Governor Cuomo’s multi-pronged effort to fight the federal tax assault. Along with the Governors of New Jersey and Connecticut, Governor Cuomo announced a coalition to sue the federal government. The new law effectively preempts the states’ ability to govern by reducing the ability to provide for their own citizens and unfairly targets New York and similarly situated states in violation of the Constitution.