On January 19, Governor Cuomo introduced an Executive Budget calling for a temporary $ 1.5 billion personal income tax increase targeting New York’s highest earners.
Left-wing Democratic supermajorities in the State Assembly and Senate responded with proposals for a staggering array of $ 7 billion in tax increases, primarily targeting high-income individuals.
The only question that remained was how far the once dominant and now politically damaged governor would go to reach an agreement.
Now we know the answer: quite a long way.
The budget for the fiscal year that began April 1 will reportedly include much broader income tax increases than those originally proposed by Cuomo.
The Governor agreed to increase the state’s existing personal income tax rate from 8.82 percent to 9.65 percent on income just over $ 1 million for individuals and $ 2 million for joint-filing couples; 10.3 percent on revenues of $ 5 million; and 10.9 percent on revenues of $ 25 million or more. New York City’s top earners will now pay the highest combined state and local income taxes in the country.
Cuomo also agreed to raise the state corporate tax rate of New York’s most profitable companies from 6.5 percent to 7.25 percent, partially undoing a rate cut that was a hallmark achievement of his first term.
While the corporate rate hike would reportedly expire after three years, the personal income tax increases would not expire until the end of 2027, which, given recent Albany precedents, equates to never.
By adjusting the very strict cap on state and local tax deductions (SALT) in the 2017 federal tax law, New York’s effective marginal tax rate was already at an all-time high.
Raising the state tax rate by as much as 24 percent, an average of more than $ 500,000 a year for New York City’s 1,786 households in the $ 10 million range, according to 2018 data, could provide a boost end for an unknown amount of high income.
Most of them already own second (and third) homes in lower-tax jurisdictions. And they are all familiar with the legally watertight checklist of the steps required to change tax “domiciles” to a lower-tax state while maintaining a part-time residence in New York.
Not coincidentally, Cuomo and the Democratic governors of six other high-tax states, including New Jersey, released a joint letter last week imploring President Biden to reinstate the SALT break within the package of tax increases expected to fund the next $ 1 trillion from Biden. Family plan.
Biden’s press secretary responded that the SALT solution “will cost money,” but the administration would be “happy to hear his ideas.” Which could mean just one thing: raising federal income tax rates higher than Biden already plans, so New York’s top earners can lower their (increased) state tax bills while paying more to the feds. .
One way or another, it appears that the full extent of the economic damage caused by Albany’s upcoming state budget will largely be decided in Washington.
EJ McMahon is an adjunct fellow at the Manhattan Institute and a senior fellow at the Empire Center.