CAN CUOMO REPLACE STATE INCOME TAX WITH PAYROLL TAX?

Harris Lirtzman is a retired teacher who once worked for both the New York State Comptroller and the NYC Comptroller. He is our unofficial ICEblog budget expert. Last night he commented on our analysis of Arthur Goldstein's January Delegate Assembly report where UFT President Michael Mulgrew spent some time covering Governor Andrew Cuomo's budget proposal.

Mulgrew made our governor student of the month. One idea Cuomo has would replace or change the state income tax (no longer federally tax deductible) to a payroll tax. Another is to turn state taxes into charitable contributions (still federally tax deductible).

Harris commented here last night:

Harris L. said...

All Mulgrew's blithering about how NYS will be able to find a practicable way to replace the now-limited deductibility of income and property taxes by making state taxes "charitable contributions" or by replacing the income tax with Rube Goldberg-type changes to payroll taxes is just that, blithering.

Nobody knows what the governor's talking about. The few bread crumbs he's dropped randomly in press conferences make no sense to budget and tax people who do this stuff for a living.

Mulgrew can wish it were so but he ought not put around the idea that pressures on state and local budgets resulting from the damnable federal tax law can be easily waived away by some state-based shenanigans that the IRS would disallow anyway.

Harris supported his comment by sending me an article from the NY Times which shows how complicated Cuomo's tax proposal would be.

From the Times:
The report, released this week, laid out at least a half-dozen ways New York could rewrite its tax code, with no indication of which option legislators might pursue. There was a potpourri of progressive rates, wage credits and tax-withholding schemes, with officials cautioning that all the options would require further study. No bills have been drafted.

The possibilities included completely replacing the state income tax with an employer-side payroll tax; introducing a new progressive payroll tax in addition to the existing income tax, with tax credits to make up the difference; or designing a payroll tax only for wage earners above a certain income threshold — the taxpayers most likely to be hurt by the federal tax plan in the first place. Some versions would be mandatory. Others would be opt-in.

More than anything, the report illustrated how difficult it may be to turn academic theory into real policy, serving as a cautionary guide to other states contemplating similar options. And it underscored the political challenges that lie ahead for Gov. Andrew M. Cuomo, as he seeks to sell a new payroll tax that could slightly reduce workers' wages, even though the net payout, after taxes, would remain the same.

To sum it all up, a grand tax rewrite to get around the federal tax changes is not likely to pass in Albany.  Still our governor, who is probably eying the White House for 2020, is Mulgrew's student of the month. 

Hey, states rights are cool nowadays. You never know but I haven't forgotten Cuomo's anti-teacher, anti-public school, anti-labor record.