How The GOP Tax Plan Impacts NYC Residents

NEW YORK, NY — Republican members of Congress passed a major tax code overhaul on Wednesday that will be a bad deal for hundreds of thousands of New Yorkers and the statewide economy, city and state leaders say.

"The tax bill passed by Congress was written by millionaires for millionaires, while everyone else suffers. That is class warfare," Mayor Bill de Blasio said in a statement Wednesday. "It’s going to hurt working families and seniors. It’s going to hurt cities and towns – not just on the coasts – but everywhere across our country."

The biggest hit to New York City comes from limits to the amount of state and local taxes one can deduct from a federal tax bill. The provision was common to the Senate's and the House of Representatives' respective bills and made it into the final version that both chambers ultimately approved.

The new law would limit deductions for state and local income, property and sales taxes to $10,000. The current law lets taxpayers deduct the full amount from their federal tax bills, a provision that benefits 1.3 million New York City households, according to City Comptroller Scott Stringer's analysis of the separate House and Senate bills.

Stringer's office has not published an analysis of the latest tax plan. But under similar recent proposals, ending the SALT deduction, as it's known, would be the primary cause of the $800 average federal tax hike that nearly 700,000 New York families would see, Stringer's office says. Most of those families make $100,000 or less each year.

"Slashing SALT is a direct assault on New York City," Stringer said in a statement late last month. "It doesn’t matter if you’re a Democrat or a Republican — if you’re a New Yorker, these bills target you. They’re economically backwards and morally wrong."

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Removing most of the SALT deduction won't directly impact New York City's budget, but could push city lawmakers to decrease local taxes, which could mean cuts to city services, Freddi Goldstein, a spokeswoman for Mayor Bill de Blasio, said in an email earlier this month.

Limiting the SALT deduction would effectively cause a 20 percent hike to New Yorkers' state income tax and property tax bills, Gov. Andrew Cuomo told reporters on a conference call Monday.

Cuomo accused Republican lawmakers of using high-tax, Democratic-leaning states like New York and California, which already pay more in federal taxes than they get back in federal aid, as a "piggy bank" to fund tax cuts in GOP states.

"I can't remember the last time you've seen this divisive an act along purely partisan lines," Cuomo told conservative radio host John Catsimatidis on Sunday. "It is a dagger at the economic heart of New York, and it's going to divide this nation even more."

The Republican bill also cuts tax rates for corporations and high-income people, meaning the richest New Yorkers stand to gain the most, city leaders say. The top 1 percent of earners in the city stood to get an average tax break of more than $100,000 under the House of Representatives' plan, while those making less than $100,000 a year would see an average cut of just 1 percent, according to Stringer's office.

City officials have said most of the 3.9 million New York families who file federal income tax returns wouldn't see their tax bills change, while a small fraction would see a small savings.

The bill also repeals the federal requirement that every American have health insurance or pay a tax penalty. Known as the individual mandate, that's a key piece of the Affordable Care Act, the landmark health care law that Republicans have long sought to replace.

That provision would reduce the federal deficit by $338 billion over 10 years, but leave 13 million more Americans uninsured by 2027, according to the nonpartisan Congressional Budget Office. City officials worry that number could include hundreds of thousands of New Yorkers, meaning health insurance premiums would rise.

The repeal could have a more muted impact in New York, according to an analysis by the Empire Center for Public Policy, a conservative think tank. Health insurance premiums are more expensive here, so a relatively small number of people not covered by their employers found it cheaper to buy insurance rather than pay the penalty. That means the number of people who would drop their policies with the mandate gone would also be relatively small, the Empire Center wrote.

De Blasio and others also worry the bill could trigger mandatory spending cuts to Medicare, Medicaid and other social programs because it would balloon the federal deficit by nearly $1.5 trillion over 10 years.

Tax reform has been a priority for President Donald Trump and Republican congressional leaders, and a bill is likely to pass this week despite vocal opposition from Democrats and initial skepticism from some Republicans.

(Lead image by Cytis via Pixabay)