Reducing state income tax is the obvious, easy solution
Sen. Charles Schumer and Gov. Andrew Cuomo are protesting the Republican tax plan because it may include a reduction or elimination of the state income tax deduction on federal returns. Let’s explore this scenario:
In 2016, a New York State couple with $100,000 of taxable income would pay $16,543 in federal tax and $5,774 in state tax. If they were allowed to deduct this state tax on their federal return, they would save $1,444. There would be no savings on their New York return because you can’t deduct state income tax on a state return.
Now, if New York lawmakers would reduce the state income tax rate by 1.5 percentage points, the decrease in state tax would offset the amount of increase due to the loss of the deduction on the federal return, and the couple would break even. Plus, the majority of taxpayers who do not itemize would benefit from the decrease in New York income tax. Everybody would win.
Why won’t Cuomo do this for the people of New York?
Eric F. Torsell