GOP Tax Bill Creates Tough Competition For NYC, Experts Say

MIDTOWN MANHATTAN, NY — The federal tax overhaul that passed Congress on Wednesday will hike wealthy New Yorkers' bills the most, making it harder for the state to stay economically competitive, tax experts said Wednesday.

Most New Yorkers won't see their tax bills rise under the Republican plan, known as the Tax Cuts and Jobs Act. But the state's highest earners will pay the most because the bill limits federal deductions for state and local taxes, said Kathryn Wylde, president and CEO of the Partnership for New York City, a business group.

Nearly every taxpayer in Florida, which has no state income will see a tax cut under the new law, but the wealthiest in high-tax New York City could see their bills rise as much as $281,000, according to an analysis by Wylde's group. That's because the GOP bill caps deductions for state and local taxes at $10,000, a provision that impacts the one third of New York City taxpayers who itemize their deductions.

That widening gap may make it more difficult for New York to attract talented, high-income workers and the companies that employ them, experts said.

"The way the tax bill is structured means that we're going to be disadvantaged in terms of the higher-income taxpayers, and that's a problem for our long-term competitiveness and for our long-term growth," Deputy City Comptroller Preston Niblack said Wednesday night at a teach-in about the tax bill at John Jay College of Criminal Justice.

Democratic New York City officials have slammed the tax bill, a priority of President Donald Trump's, as a giveaway to the rich that will hurt working-class and poor people the most.

That's not necessarily true in the short term, said Greg David, a columnist for Crain's New York Business — single people making $500,000 or less and married couples making $1 million or less will see a tax cut starting next year. But those personal tax cuts will end in 10 years, while corporations will see a permanently lower rate, David said.

The danger to working-class New Yorkers comes from the possibility of federal budget cuts "on a scale that we've never seen before," said James Parrott, the director of economic and fiscal policies at the New School's Center for New York City Affairs.

The bill will increase the federal deficit by well over $1 trillion, meaning Congress will have to eventually cut spending by at least that much. Republicans have indicated that the first programs on the chopping block will be those that can afford to lose the least, Parrott said — food stamps, public housing and hospitals, and Medicaid, among others.

"That will affect everybody in New York City and New York State, as well as a lot of Trump voters around the country," Parrott said.

Those cuts aren't likely to come for at least another year, but they could also squeeze the city and state budgets, which get 10 percent and 30 percent of their revenue, respectively, from federal funding, Parrott said.

That means lawmakers will have to think carefully about where to raise taxes to cover those gaps, said Martha Stark, a professor at New York University's Robert F. Wagner School of Public Service.

The top 1 percent of New York City's earners pay 49 percent of the city's income tax. Increasing that share further, as some have suggested, could drive the wealthiest people away from the metropolitan region, Wylde said.

"We should be very careful in looking at what our assets are here for our economy and where they're disappearing to," Wylde said.

(Lead image: Deputy City Comptroller Preston Niblack speaks at a teach-in about the Republican tax bill on Wednesday. Photo by Noah Manskar)