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"Fixes" to federal tax overhaul part of new state budget

Governor Cuomo's office
Governor Cuomo, with budget director Robert Mujica and counsel Alphonse David, gives budget briefing on Friday evening, March 30th, as lawmakers completed passing the state budget.

The newly approved New York State budget includes a work around for the partial loss of state and local tax deductions in the federal tax overhaul.

The legislature largely accepted Cuomo’s plan to provide an optional pay roll tax to substitute for the state income tax for businesses who adopt the program. The employer would still be able to take a deduction for the pay roll tax, and workers would have less taxable income to pay to the federal government.    

The other option creates two state run charitable funds, for health and education. New Yorkers would be able to pay the equivalent of their property taxes to the funds, and then deduct the donation from their federal taxes.

Cuomo likens the federal tax changes as a “missile”, targeted  at New York’s tax code.

“ We literally had to flee the zone we were in and change the state tax code so it no longer applied and we had to get it done before the missile hit. After launch, but before strike,” Cuomo said in a budget briefing Friday evening. “And that's what this tax code change attempts to do.”

Senate Deputy Majority Leader John DeFrancisco, who is also a Republican candidate for Governor, is doubtful, though , that the alternatives will really work.

He says the payroll tax would be an “administrative nightmare”. And he says it’s uncertain whether the IRS will accept the charitable trust donations as a substitute for property taxes, calling them “foolish’, and “misleading”.

Cuomo concedes that the best fix is to repeal the federal tax overhaul altogether. And he says between ow and the November elections, that is what he will work toward.