Tax Changes in New York State and New York City on the Horizon? Maybe!
New York State Tax Reform Proposals
New York State Governor Andrew Cuomo issued a press release on January 6, 2014 outlining a $2 Billion tax relief plan targeting businesses and individual taxpayers. The governor touts a $2 billion surplus in the state budget based on current spending estimates. This represents a turnaround from a $10 billion deficit three years ago. The proposals outlined by Gov. Cuomo were based upon recommendations put forth by the Tax Reform and Fairness Committee which was established by the Governor.
The proposals outlined by the Governor include the following:
- Lower Franchise Tax Rates: Combining the bank tax and corporate income tax into one tax regime and lowering the rate to 6.5%. This change would provide approximately $346 million in tax relief to businesses.
- Upstate Manufacturers Relief: The Governor proposes to eliminate the Corporate income tax on upstate manufacturers providing approximately $25 million in tax relief.
- Real Property Tax Credit for Manufacturers: The proposal includes the creation of a refundable tax credit against corporate and personal income taxes equal to 20 percent of a company’s annual real property taxes. This would save an estimated $136 million to the manufacturing sector.
- Property Tax Relief and Renters Tax Credit: Cuomo’s proposal would freeze property taxes for a two year period (subject to certain local restrictions). When fully implemented this would save approximately $1 billion in taxes. Note that the Governor’s proposal would exempt New York City from the property tax freeze. For renters, the proposal would implement a refundable personal tax credit for renters with income below $100,000. The credit would increase based on family size and would provide nearly $400 million in tax relief for 2.6 million renters in New York state.
- Estate Tax Reform: Increase the estate exemption for New York purposes from the current $1 million to equal the current federal exemption of $5.25 million over a phased-in period. The Governor also proposes to lower the top estate tax rate to 10 percent.
- Accelerate the Phase-Out of the Temporary Utility Assessment: Governor Cuomo proposes to immediately eliminate the 2 percent Temporary Utility Assessment on commercial electric, gas, water and steam utility bills for industrial customers and to accelerate the phase-out for remaining customers, saving an estimated $600 million over the next three years.
At this point, these proposals are just that – proposals. But given the Governor’s attention to these issues (as well as an upcoming reelection bid this year) it is likely that these will make their way into the Executive Budget for FY 2014-2015 which is due by the end of this month.
New York City Tax Increases Proposed by New Mayor
At his inaugural address on New Year’s Day newly elected New York City Mayor Bill DeBlasio announced his desire to implement broad early education and after-school programs throughout the City. These programs would be funded by his proposed five year tax increase on New York City residents with taxable income of greater than $500,000.
The top tax rate would increase from the current 3.88 to 4.15 percent, representing a 13.6 percentage increase in the top rate. If enacted, it is estimated that the new tax would bring approximately $532 million in new tax revenues for the City, enough to fully fund these programs for the five year period.
Given the sweeping tax reform proposals just released by the Governor’s office and the fact that any tax increases must be approved by the State legislature should make for an interesting tug of war concerning New York state taxes for 2014.
All New York State taxpayers should continue to monitor these items for their impact on their tax picture.