Benjamin Franklin once said that “in this world nothing can be said to be certain, except death and taxes.” Let’s avoid a conversation about death and instead concentrate of the (slightly) less gruesome of certain things: taxes.
The Trump administration and Congress passed tax reform legislation, the Tax Cuts and Jobs Act, in December of 2017. The act is a comprehensive reform of the existing tax code. It reduced the corporate tax rate -something the Buffalo Niagara Partnership has long advocated – from 35 to 21%. Controversially, the act also limits the amount of state and local taxes (often referred to as SALT) that can be deducted from a person’s federal tax. Under the new plan, taxpayers who itemize will be able to deduct their state individual income, sales and property taxes up to a limit of $10,000 in total starting in 2018. Currently the deduction is unlimited.
A criticism of the SALT provision is that it will adversely impact high taxed states like New York. To combat the potentially negative tax implications of the limited SALT deduction on the state’s bottom line, Governor Cuomo, during his 2018 State of the State message, promised to explore the feasibility of replacing New York’s current income tax system with a revised payroll tax system. Payroll taxes are deductible under the Tax Cuts and Job Act.
E.J. McMahon, Research Director for the Empire Center for Public Policy recently published a blog dissecting the idea of shifting to a payroll tax system. Read why the switch may not be so easy and what it could mean for New York’s employers.