New Yorkers could see more than $43 billion in tax hikes and lose $609 million in federal aid next year if Congress doesn’t take action on what’s known as the fiscal cliff, state Comptroller Thomas DiNapoli said in a speech today to the Business and Labor Coalition of New York – BALCONY—in New York City. Under current law, tax increases and deep spending cuts are scheduled to take effect Jan. 1, 2013. Experts fear that could throw the country back into recession, and federal lawmakers and President Barack Obama are trying to negotiate a compromise deal to reduce the impact.
Nearly all working New Yorkers would see a sharp rise in their federal taxes as of Jan. 1 if no changes are made, according to DiNapoli. His analysis found that the pending 47 percent hike in the payroll tax rate would cost New Yorkers $7.7 billion in 2013 and immediately reduce paychecks. The child credit would be reduced from $1,000 to $500 per child.
Absent any action, another 3.4 million New Yorkers would have to pay the Alternative Minimum Tax, the comptroller said. About 500,000 people are required to pay it currently. Impacted New Yorkers would have to pay an average of $5,180 more than they would under this year’s tax provisions. More than half of those who pay federal income tax in New York would pay the AMT. Congress created the tax to make sure the highest income earners pay their fair share of taxes, he said. The AMT is not indexed for inflation.
“There is real danger ahead for New York’s economy if America goes over the fiscal cliff. Many New Yorkers are still recovering from the Great Recession and struggling each day to make ends meet – and some are literally digging out from Sandy’s devastation. The fiscal cliff’s massive one-two economic punch could easily push the state’s economy backward,” DiNapoli said in his speech.
“Voters sent a clear signal in November that a deal must be done and that there must be a balanced approach to increased revenues and spending cuts,” he said.
The other part of the fiscal cliff—automatic cuts in federal spending—would result in a loss of $5 billionin federal funding to state and local governments in New York over nine years, DiNapoli said. Federal Funds Information for the States said New York would lose $609 million in 2013, including $210 million in education funding, $137 million for health and human services and $128 million for housing programs.
The fiscal cliff could harm New York’s securities industry by undoing progress that has been made, the comptroller said. Wall Street is on track to earn more than $20 billion this year, twice what New York City’s financial plan projected.