ALBANY — A new study by a conservative think tank says President Donald Trump’s 2017 tax law gave most New Yorkers a tax cut, even as Gov. Andrew M. Cuomo insists on repealing the measure because he says it will cost New Yorkers up to $15 billion a year in greater federal income tax payments.
Using recently released Internal Revenue Service data from 2018 tax returns, the Empire Center for Public Policy concluded that New Yorkers overall paid a net 2.4% less in federal income taxes — or $3.3 billion — in 2018 compared with the years before the tax law was enacted.
The federal tax cut package capped the deductibility of state and local taxes at $10,000. That meant that those who paid state and local taxes greater than $10,000 no longer could reduce their taxable income by the full amount they paid.
"The drop in New York’s total federal income tax burden runs counter to the Cuomo administration’s repeated claim that New Yorkers would pay an additional $14 billion as a result of the federal cap," said E.J. McMahon, director of the Empire Center. "In fact, given the expanded standard deduction and the distribution of rate cuts in the [tax law], it was always clear that the new tax law would result in tax savings for most New Yorkers — and the new data confirm it, showing that taxes paid by New Yorkers dropped in every income range reported in IRS data, up to $500,000."
However, tax law experts say it's a more complicated calculus. While it's true that most New Yorkers saw a small tax break, they say, many taxpayers in areas such as Long Island with high salaries and high local property taxes were hit harder, as Cuomo asserts.
In addition, the Empire Center study, Cuomo and the tax researchers agree that New York and other states led by Democrats fared worst under Trump’s tax law that those led by Republicans. The Empire Center found that only Maryland and Colorado benefited less than New York from the 2017 tax law; Arkansas, Florida and Texas each saw about five times greater savings than New York.
"This legislation was passed with only Republican votes and the Republicans decided to disadvantage the blue states, the high-tax blue states of New York and the like," said Michael Graetz, professor emeritus of tax law at Yale and Columbia universities, who read the Empire Center study. "There are a lot of people who paid more in taxes and most of them seem to be in blue states."
Cuomo budget spokesman Freeman Klopett called the Empire Center’s data "meaningless."
"While the SALT cap impacted taxpayers differently, it unquestionably raised taxes on New York taxpayers, taking as much as $15 billion from them and sending it to Washington to spend on other states," Kloppet said. He called the tax law "a federal raid on New Yorkers."
The federal tax law cost New York taxpayers $12.3 billion in additional federal tax payments in 2018 and is projected to cost New Yorkers up to $15 billion a year by 2025, Klopett said Monday. He cited a May study of state tax data by the Rockefeller Institute of Government of the State University of New York.
"This number represents the loss of economic activity in the state, effectively a tax increase, as these dollars are no longer available for households to spend in New York," states the study.
But McMahon said the new IRS data confirms his conclusion that most of New York fared better under Trump’s tax law than Cuomo has claimed.
"Taxes paid by New Yorkers dropped in every income range reported in IRS data, up to $500,000," McMahon said. He said top earners did pay more: Tax payments increased by 4.3% for New Yorkers earning between $500,000 and $1 million, and by 0.2 of 1% from those earning $1 million or more.
Tax law experts say neither the Empire Center’s study nor Cuomo’s assertions reflect the full impact of the 2017 tax law.
"Cuomo says it will cost New Yorkers $15 billion, and I’m sure that’s right," said Graetz. "But there are other New Yorkers who got cuts and the total of that in New York is minus $3 billion, which is a very small number if you compare it to the no-tax states like Florida, that got tax cuts of 10 or 11%."
"When you look at data, there are a lot of stories you can tell," he said. "They are telling different stories, but they are not inconsistent. They can both be true … they are both telling a partial story," Graetz said.
Frank J. Sammartino, senior fellow at the Urban Institute of the Brookings Tax Policy Center, said, "So while it is true that most New Yorkers did have a tax cut, it is also true that because of the limit on the SALT deduction higher-income New Yorkers paid more federal income tax than high-income residents of many other states."
Cuomo’s $15 billion estimate for the cost to New Yorkers only includes the loss of deductibility of state and local taxes, or SALT, on federal income tax returns. But Cuomo doesn’t account for the tax cuts for more New Yorkers in lower tax brackets.
The Empire Center did. It found that, overall, New Yorkers paid less in federal income taxes under the 2017 law because far more residents saw cuts compared to wealthier residents who saw modest increases.
Taken together, the tax law professors said the Empire Center study and Cuomo’s estimate provide New Yorkers with the clearest picture yet of the impact of the 2017 federal tax law in high-income, high-tax states like New York, New Jersey and California.
On Long Island, the study found the total federal income tax paid in Suffolk County dropped 2.1% from 2017 to 2018 under the tax law, while the total federal income tax paid in Nassau County rose 1.2% countywide.
McMahon’s data further states that every tax range in Suffolk County paid slightly less in federal taxes including a 5.9% cut for households making $75,000 to $100,000 and 0.4 of 1% cut for households with $200,000 or more in income. The deepest cuts were in the lower income ranges: Households making $10,000 to $25,000 saw a 31.4% cut; those making $25,000 to $50,000 saw a 16.3% cut; the $50,000 to $75,000 range saw a 9.8% cut; and the $75,000 to $100,000 range saw a 5.9% cut.
In Nassau County, only the income tax bracket for residents earning $200,000 or more saw an increase in their federal tax and that was 3%. The IRS data doesn’t further break down that large income range. Households making $10,000 to $25,000 saw a 31.3% cut; the $25,000 to $50,000 range saw a 17% cut; the $50,000 to $75,000 range saw an 11% decrease, and the $75,000 to $100,000 range saw 5.5% cut.