Tax bill: Here’s who stands to win and lose on Long Island

WASHINGTON — Next year, Long Islanders will be forced to cope with an almost totally new federal tax code, one that even Republican congressional tax writers behind the legislation acknowledge creates winners and losers.

Long Island overall loses big, say local business leaders, lawmakers and economists, because the bill eliminates the full deduction for state and local taxes, called SALT — which is why every member of Congress who represents the island voted no on the bill.

“While there may be a few winners, the majority of Long Islanders will pay more federal taxes as they will no longer be able to deduct all their state and local taxes,” said Kevin Law, CEO of the pro-business Long Island Association.

Republican leaders, however, expressed confidence they will pass the final version of the 500-page, $1.5 trillion bill, which they made public for the first time Friday evening, and send it to President Donald Trump to sign into law before Christmas.

The many big and small changes in tax code that are littered throughout the complex legislative language of the bill — and their effect on taxpayers and communities — are still not fully understood by lawmakers, economists or accountants.

Does anybody grasp the full impact?

“Nobody does, and that’s what so frightening about it,” said Suffolk County Comptroller John Kennedy. “I guess we’re just going to have to take a deep breath and do the best we can as we get into 2018.”

Here is a sampling of the tax bill’s winners and losers on Long Island.

WINNERS

Corporations. Henry Schein, Long Island’s largest publicly traded corporation, now pays an effective tax rate of 28 percent. But next year the top corporate rate will be 21 percent, down from 35 percent. In addition, Schein can also bring back $937 million in overseas profit at a lower rate — 15.5 percent for liquid assets and 8 percent for illiquid assets.

Wealthier taxpayers. Nassau and Suffolk are among the wealthiest counties in the state, and those making $500,000 or more will see their top rates tumble to 37 percent from 39.6 percent. The wealthiest will see the exemption for their estate taxes doubled to $11 million.

Other taxpayers. Each of the seven tax brackets has a rate cut, although the lower taxes diminish over time — and many middle-income filers will see their taxes go up. All individual rates expire after 2025.

Families with children and illnesses. For each child, a family will get a $2,000 tax credit, twice the current rate, and $1,400 would be refundable. And medical expenses over 7.5 percent of adjusted gross income can be deducted for this year and next year, but then returns to 10 percent.

Investors and small businesses. Long Island’s many small businesses and investors are expected to benefit from a 20 percent deduction for pass-through income.

Apartment complexes. More people could rent to avoid state and local taxes on homes.

“Rentals may become more desirable than homeownership when we lose some of these deductions,” said Paul Llobell of Great River, the Long Island Board of Realtors legislation committee chairman. The Census Bureau estimates homeowners now occupy about eight of 10 housing units. A shift could lead to construction of more apartment buildings.

LOSERS

Homeowners. Real estate values are predicted to drop 10 percent, and possibly more, said Llobell, because of the cap of $10,000 on deductions for property, sales and income taxes. Across New York, he said, 46 percent of homeowners pay more than $10,000 in property taxes.

First-time buyers. “Affordability is paramount for young buyers,” Llobell said, but they might decide not to buy if they cannot justify higher home prices and taxes on Long Island with fewer deductions on their federal income tax. They might rent or leave Long Island instead.

Retirees and the elderly. With a drop in real estate values, many retirees and elderly will have to adjust their retirement plans if they used their homes as nest eggs but the real estate turns out to not be worth what they thought it would be, Llobell said.

School and other taxing districts. Capping SALT will boost pressure to lower property and state income taxes, said Rep. Lee Zeldin (R-Shirley).

Donald Leistman, an Association for a Better Long Island board member, said school districts and other districts will be forced to cut, curb or consolidate services as taxpayers look to lower the local tax burden.

Public debt refinancing. Suffolk County has saved $29 million in interest from using advanced refund bonds to refinance older bonds, said Kennedy, the comptroller. But the tax bill takes away that option. “It escapes me why Congress would do this,” he said.

Transportation and roads. With lower local tax revenues from reduced real estate values, elected officials will look for service cuts. “One of the first things they strike out at is transportation,” said Marc Herbst, executive director of the Long Island Contractors Association. That includes repairs and new roads.

Overall, Zeldin said, New York loses as other states gain.

“This bill remains a geographic redistribution of wealth, taking extra money from a place like New York to pay for deeper tax cuts elsewhere,” he said. “This bill chooses winners and losers in a way that could have and should have been avoided.”