Over 'cliff': $43B more in taxes for NYS
More than half of New Yorkers who pay federal income taxes will get hit by the alternative minimum tax, or AMT, if the United States goes over the "fiscal cliff," New York State Comptroller Thomas DiNapoli said in a report scheduled to be released Thursday.
All told, New Yorkers would pay an additional $43.4 billion in federal taxes if the fiscal cliff isn't modified, the report said; nearly half of those additional taxes would stem from the wider net cast by the AMT.
The fiscal cliff is a mix of tax increases and spending cuts that will automatically go into effect beginning Jan. 1 if President Barack Obama and a politically divided Congress do not agree on a budget compromise. The Congressional Budget Office has warned that the economic damage from the fiscal cliff would likely cause another recession.
"There is real danger ahead for New York's economy if America goes over the fiscal cliff," DiNapoli said in a news release. "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."
Currently fewer than 500,000 New Yorkers pay the AMT, an alternate tax system intended to ensure that the wealthiest earners don't get out of paying taxes through deductions and loopholes. The system wasn't pegged to inflation, so Congress has regularly adjusted it with patches. The latest patch expired last year.
Without a fix, about 3.7 million New Yorkers who pay federal income taxes will be funneled into the AMT. Their taxes would go up an average $5,180, the report said.
The second-biggest hit to New York would be the expiration of a payroll tax cut that was part of the federal economic stimulus package and expires at the end of the year. Nearly all workers would see taxes go up by 2 percent on earnings under $113,700. That translates into a $7.6-billion increase in the state, the report said.
Using a hypothetical couple in Nassau County earning a combined $250,000, the report estimated their federal taxes would increase by $12,032 to $78,924. That's an 18 percent increase compared to what the couple would pay under current laws. The estimate assumes the couple has a child in college, pays average property taxes and gives to charities.
The state would also lose $609 million of federal funds next year. The biggest cuts would be $210 million to education, $137 million for health and human services programs and $128 million for housing programs.