New York residents will be protected by the Cuomo administration's new proposals on a specific charitable contribution program and a to-be-introduced payroll tax system. These programs will limit how much can be deducted in both local and state taxes. This overhaul comes after the federal government restricted both local and state deductions to a maximum of $10,000 every year.
Employer compensation expense tax
Cuomo has protested against this deduction cap. He said that it is parochial and targets steep tax states including New York. He said that such proposals hurts the tax base of the state. The neighboring states also plan to file a legal challenge against this particular federal law. Robert Mujica, the Budget Director, said Cuomo is adding to the budget proposal the “employer compensation expense tax”. The latter would be optional for both the employees and the employers. This rule would employees to sidestep the limit of federal deduction. Both the employer and the employee will not face any increases.
Two charitable programs of a contributory nature were proposed by Cuomo's office. One would be for education and the other for healthcare. Individuals may contribute money to finance the state services. The contributions will also be tax deductible. It follows that the taxpayers who itemize deductions now could claim new contributions based on local and state taxes. It is an excellent method to move away from $10,000 deduction cap. The state proposal will include tax credit that will be equal to 85 percent of charitable donation at the time of people filing taxes. The contributed money will be credited back. It means the local tax bill at the end remains the same.
In his statement, Cuomo said that while New York's economic heart is being targeted by federal government, this new legislation will protect the hard at work residents of the city from Washington's scourge policies. This charitable contribution program can also be applied for municipalities and schools who wish to make their own local initiatives. A few states like California, are considering similar plans.
According to Mujica, the plan will be revenue-nuetral for this state. This will keep the prosperous New Yorkers who would be affected by deduction cap in the state. The local government does not want them to leave, as it would mean a substantial financial hit to the state treasury. It wants to maximize the deductibility by offering employers their option to protect the employees from tax rises.