Cuomo Urges Tax-Code Tweaks to Offset Federal Overhaul's Impact

By FeaturesDow Jones Newswires

New York Gov. Andrew Cuomo urged state lawmakers Tuesday to work with him to make changes to the state's tax code this year in response to the recently passed tax overhaul in Washington.

The Democratic governor, in a budget address in Albanybefore the state Legislature, proposed replacing part of the state's income tax on individuals with an equivalent payroll tax on employers.

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"This shift, while dramatic, would thwart what the federal government was trying to do," Mr. Cuomo, who seeks election to third term this fall.

The intention is to offset a cap on how much in state and local tax New York residents can deduct from their federal taxes, a limit put into place under the new Republican-backed tax law.

Under the new federal law, businesses can still deduct payroll taxes from their federal income taxes, so Mr. Cuomo's idea offers a way to preserve the benefits of deductibility by shifting the deduction from individuals to their employers.

The announcement had been anticipated since Mr. Cuomo mentioned it earlier this month, and more details are expected this week. Mr. Cuomo announced the proposal at the top of the budget presentation Tuesday, signaling he is placing a priority on the issue.

He also said another plan was under consideration was one that would allow individuals to donate to local and state governments or to affiliated public projects in lieu of paying local taxes. The new tax law limited the deductibility of local taxes but not of charitable giving.

The White House and Congress have been pushing back on similar ideas around the country that seek to work around the new federal tax law.

"My belief is [governors] would be better served as public officials in spending less time evading taxes and creating new loopholes in the tax system and more time becoming more efficient and finding ways to lower taxes on those families and those workers," said Rep. Kevin Brady (R., Texas) last week. Mr. Brady is chairman of the House Ways and Means Committee, through which all federal tax-law changes generally flow.

Mr. Cuomo pointed Tuesday to other fiscal challenges for the state, most notably a $4 billion budget deficit. He pledged to close the gap through what he called "revenue raisers" -- effectively new taxes and fees -- on health insurers, opioid manufacturers and online sales. He said his proposed budget would keep state spending growth under 2%.

Overall, Mr. Cuomo proposed a budget that totals $168 billion, with spending in major areas flat or seeing only modest increases.

The State Assembly Speaker and Senate Co-leaders will negotiate the plan with the governor. The budget is due April 1.

Education, which is frequently a contentious element of the budget, would see a 3% spending jump, under Mr. Cuomo's proposal. That is less than activists had sought and is expected to cause friction.

As in year's past, Mr. Cuomo is mixing social-policy ideas into the budget negotiations. Among them are a plan to impanel the state health department to study the effects of legalizing recreational marijuana, a measure long sought by liberal activists but of which Mr. Cuomo has been wary.

"This is a hotly debated topic ... and it would be nice to have some facts," he said.

Write to Mike Vilensky at mike.vilensky@dowjones.com

(END) Dow Jones Newswires

January 16, 2018 17:02 ET (22:02 GMT)

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