New York’s remaining wealthy residents – those who have not already fled to Florida – may soon be packing their bags to avoid getting walloped by President Trump’s tax reform plan, fuzzy though it is.
They might be followed by peers from California, New Jersey and other high-tax states.
Despite the plan’s tilt to businesses and the rich, New York’s wealthier residents could nevertheless find themselves driven out by the proposed elimination of the deduction for state and local taxes. It wouldn’t take long before upper-income earners retired down South in bigger droves, searching for kinder, gentler tax climes.
This is one scenario being drawn by experts as they attempt to digest scant details from the 200-word outline of a tax plan that Trump released Wednesday.
The plan – awkwardly defended by Treasury Secretary Steven T. Mnuchin, who said he could not say how the plan would affect his boss personally – has upset the president’s political allies and raised serious doubt it would gain favor among many House Republicans, among them Reps. Chris Collins, R-Clarence, and Tom Reed, R-Corning.
Lower- and many middle-income New York State residents might not have much to worry about, according to the experts. The plan doubles the standard deduction, potentially making the loss of any particular deduction moot. But those same lower- to middle-income residents might want to stop the rich who carry much of the tax burden from fleeing the state.
Collins, an early and ardent Trump supporter, made clear his stance: “…We need to have an adult conversation about this.” Yes, indeed. He is joined by Reed and Rep. Leonard Lance, R-N.J. Reed serves on the tax-writing House Ways and Means Committee.
Experts have had difficulty gauging the plan’s ultimate impact. Trump wants to eliminate nearly all personal tax deductions, except for those for mortgage interest and charitable giving. The new structure would be simpler with a larger standard deduction than the current one: $6,350 for individuals and $12,700 for couples. It would double under Trump’s plan.
Losers would include residents of high-tax states who would no longer be able to write off the thousands of dollars they pay in state and local taxes. Mnuchin’s comment about it not being the federal government’s job to subsidize the states aside, New York politicians are justifiably upset. The president may want to pay attention. There are 28 House Republican members from New York, New Jersey and California and support from at least 20 may be needed to get the bill approved in the House.
Comments by Collins, Reed and Lance signaled their intent to fight for the return of the state and local tax deduction. It’s the right decision.
Upstate high-income taxpayers now pay 5.3 percent more in taxes than they would by living in Florida. Without the state and local tax deduction, that figure would rise to 8.82 percent. Downstate numbers are worse for the wealthy. They would pay 12.7 percent more in New York than Florida, which has no state income tax. Just do the math.
This proposal has managed to unite both parties. Among Democrats, Senate Minority Leader Charles E. Schumer, D-N.Y., and Rep. Brian Higgins, D-Buffalo, criticize the plan for offering “massive” tax cuts for the very wealthy – cuts that responsible observers have said would explode the federal debt by $2 trillion to $4 trillion. The fact that even some Republicans are zeroing in on certain parts of the plan should give the White House pause.