Back in April, New York Governor Andrew Cuomo introduced a program for workers in the state that would act as an end-around to President Trump’s $10,000 State and Local Tax (SALT) deduction cap by deferring payments that exceed the cap. Eight months later, the program has become a flop as very few businesses in New York State took the governor up on his offer.
According to The Wall Street Journal, only 220 businesses in the state took advantage of the governor’s program, which allowed workers to circumvent Trump’s SALT cap by having employers impose a 1.5% levy on the workers’ paychecks (the levy will rise to 5% in 2021) on wages over $40,000. In exchange, workers would be given a tax credit in an amount equal to the levy; that amount would be used against the state income tax liability. Although the pretax income will be less, the employees’ federal tax burden would also increase.
The program was meant to attract workers who live in the highly taxed areas of downstate New York, such as Westchester County, Suffolk County and Nassau County. An article from Bloomberg noted that Westchester pays the highest property taxes in the state, at $16,493. Newsday reported that Nassau and Suffolk taxes are $11,232 and $9,333, respectively.
The article went on to report the problems the state tax loophole had. Some employers said not a lot of their workers were on board with another tax coming out of their paychecks. Others said it was too complex, while more employers complained it was not the right fit for all employees, especially those who make less than $40,000. Ken Polansky, the Business Council of New York State’s vice president, said the state should hold out and wait to see if more employers join next year, or else the state may have to modify the program.
If you have questions regarding the new tax law and how it may affect your business, or whether this program is right for your company or your employees, contact the experienced attorneys at Blodnick, Fazio & Clark for a free consultation by calling (516) 280-7105 or (631) 669-3600.