A proposal that would end taxpayers’ ability to deduct state and local taxes — including on their property — from their federal taxes would cost New York taxpayers nearly $15 billion on their annual tax bill, according to Gov. Andrew Cuomo. He called on Congress and the Obama administration today to reject proposals included in federal budget discussions that would remove the benefit.
Roughly 3.3 million New York taxpayers itemized deductions on their federal return in 2010, and 99.6 percent of them claimed a deduction for state and local taxes paid. The deductions totaled more than $57 billion, more than twice as much as the $23 billion for home mortgage interest deductions. The average cost per taxpayer of scrapping the deductions would be $4,500, said Cuomo, who released a report his administration submitted to Congress that details the potential impact on New Yorkers if the proposal were adopted.
An alternative proposal in the president’s budget would cap itemized deductions, which would cost taxpayers in this state $3.8 billion, Cuomo said.
“The proposals under consideration that would repeal or cap the deduction for state and local taxes would have severe consequences for taxpayers here in New York and across the nation,” he said in a statement. “I urge Congress and the Administration to act in the best interests of taxpayers and reject these proposals that would cost New York families thousands of dollars extra each year.”
Eliminating the ability to deduct state and local taxes would affect 596,972 taxpayers in the mid-Hudson region, which includes Rockland, Westchester, Putnam, Orange, Dutchess, Sullivan and Ulster counties. The average increase per taxpayer would be $5,000, topped only by New York City, where the average increase would be $5,500, according to the administration.
Proposals to place a new federal tax on interest income from state and local government debt “would cripple the $3 trillion municipal bond market and increase borrowing costs for state and local governments,” the report said.
Kathryn Wylde, President & CEO of the Partnership for New York City, said capping state and local tax deductibility “runs counter to the country’s economic interests, since the states that would be hurt most, including New York, are already the largest contributors to the federal tax rolls and to national economic output.”
Reps. Eliot Engel, D-Bronx, and Nita Lowey, D-Harrison, said in statements that they are concerned about the negative impact recent tax proposals would have. “We must not add burdens to New York families by limiting deductions which are important to building and sustaining a viable middle class.”