Companies in New York 'open' to new payroll tax system:
state official
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[January 16, 2018]
By Stephanie Kelly
NEW YORK (Reuters) - Companies in New York
state are "open to the idea" of moving the state income tax code to a
payroll tax system, a senior state official told Reuters on Friday.
Governor Andrew Cuomo earlier this week said the state was exploring
using a payroll tax as an alternative to the income tax in order to help
residents hurt by new limits on deductions of state taxes from federal
returns, under a sweeping overhaul of the U.S. tax code passed in late
December.
Cuomo, along with governors of other high-tax states such as California,
has railed against the provision of the federal tax overhaul that
introduced an annual cap, of $10,000, on the deduction of state and
local income and property taxes, known as or SALT. The $10,000 limit,
which became effective for the 2018 tax year, will hit many taxpayers in
states with high incomes, property values and taxes.
Paying New York state taxes out of corporate payroll rather than an
income tax would help ease the effect on residents of the new cap. New
York state residents, however, would still face a $10,000 cap on
deductions of local and property taxes.

According to the Cuomo administration official, who spoke on condition
of anonymity because the ongoing discussions have not yet been
formalized, the chief executives of the largest employers in New York
City are willing to consider the move to a payroll tax system.
"Yes, they want to be part of it. They want to be part of how we put it
together because their employees are negatively impacted," the official
said, giving greater detail for the first time to plans broadly outlined
by Cuomo in his 2018 State of the State address on Wednesday.
"Make no mistake, they (Washington) are aiming to hurt us," Cuomo said
in his State of the State address. "This could cause people to leave the
state of New York. And it could reduce our ability to attract business."
The high-tax states facing the most pain from the new limits on SALT
deductions, including New York, New Jersey and California, are generally
Democratic leaning.
On Thursday in California a state lawmaker introduced legislation that
would allow residents to make donations instead of paying taxes to avoid
the cap on deductions of state taxes.
White House economic adviser Gary Cohn said the federal government might
try to block attempts to circumvent the cap, Bloomberg reported on
Friday.
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A U.S. Dollar note is seen in this June 22, 2017 illustration photo.
REUTERS/Thomas White/Illustration

CHARITY INSTEAD OF TAXES
Cuomo on Wednesday said he will challenge the new law in court as
unconstitutional on the grounds that the first federal double taxation in U.S.
history violates states' rights and equal protection.
The New York corporations want to be included in the plan to move to a payroll
tax, but the administration source declined to name companies, citing instead
the Partnership for New York City, which represents business leaders and
employers.
The partnership on Wednesday said in a statement that its members "applaud" the
governor's commitment to address the loss of state and local tax deductibility.
Members of the partnership include American Express, Bank of America and
BlackRock.
For a tax code restructuring, New York state is also assessing whether to create
new opportunities for charitable contributions to support public programs.
The senior official said that, per case law, a contribution to a state and local
government for a specific purpose is a charitable contribution.
"So if you want to contribute to a school, a public school specifically, or a
not-for-profit that supports a government purpose... you get a tax deduction,"
the official said. "Or the state can create a charity that also gives to
hospitals."
"You can create incentives for people to contribute to charities that would
replace some government funding," the official added.
The state will also assess how individuals would build in tax preferences in a
new system, the official said.

"But if you just turn yourself into a corp, limited liability corporation, and
pay yourself, then you magically are now able to deduct your state and local
taxes. We're looking at all of these options."
(Reporting by Stephanie Kelly; Editing by Daniel Bases and Leslie Adler)
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