I like Humble Pie, the band that is. They were always considered to be the rock and rollers rock and rollers. Once I read Governor Cuomo’s thirty day amendments to his recently released budget proposals, I couldn’t get their song, Thirty Days in the Hole to stop resonating between my ears.
The Governor apparently doesn’t like humble pie. Not the band, but the kind defined by most dictionaries as “a figurative serving of humiliation usually in the form of a forced submission, apology or retraction.” Apparently he is serious about pushing back at the injuries inflicted upon New Yorkers and other high tax jurisdiction taxpayers by the recently enacted federal cap on deducting state and local taxes. While the New York State Tax Department recently issued a report addressing the perils faced by New Yorkers from the Federal Tax Cuts and Jobs Act (see my January 22, 2018 post), Governor Cuomo has gone from report to proposal in no time at all.
The amendments to the Budget Proposal (please readers, these are still proposals) would allow employers to elect into a new “employer compensation expense tax” system. Under the system, employers would be subject to a 5% tax on certain wages of employees. Employees would get a corresponding credit on their personal income tax returns for the amount of payroll tax paid by the employer.
What would this accomplish, you ask? The employer would be able to deduct the payroll tax as a business expense, the employee would effectively get credit for the tax paid by the employer and the State of New York would still get their tax revenue. All while “avoiding” the newly capped state and local tax deduction.
Whether or not this proposal makes it to law we will have to wait and see. Even if it does make it, I can just see the backs arching at the IRS and the wheels turning to circumvent the State’s clever offensive move. Other states, most notably California, have been contemplating some creative new tax laws as well. We will be keeping an eye out so that you are informed because we don’t want you to have to spend even one day in, well you know.
Should you have questions, contact me at email@example.com or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.