Last week, Congressional Republicans unveiled the “Tax Cuts and Jobs Act” – the first, major overhaul of American tax policy in decades. Despite promises to present a plan that would alleviate the financial stress felt by middle class families nationwide, the plan is nothing more than a giveaway to businesses and the wealthiest Americans.
The below details the bill’s effect on New Yorkers.
The Biggest Losers
In New York City, 3.9 million families file federal income taxes. Of those, under this plan, 760,000 families – the majority of whom are making less than $75,000 annually – would see an increase averaging almost $5,000 next year. That’s an additional $3.7 billion the federal government will claim from these New Yorkers.
Corporate America Wins, Working Class Families Lose
The biggest reasons why New Yorkers will see an increase in their taxes come next April are the changes to the personal exemption and the limiting of the State and Local Tax (SALT) deduction. By eliminating the personal exemption and replacing it with changes to standard deductions and with tax credits that are ultimately less valuable and will be partially repealed in 2023, the federal government is essentially penalizing New Yorkers who have chosen to have a larger family. A married couple, filing jointly, with an income of $100,000 and four dependents (two children, two college-age), and $31,000 in itemized deductions would see taxes increase by $897 (+24%).
Further, the Republican bill eliminates the deduction for state and local income tax – a deduction as old as the federal income tax itself, designed to protect from double taxation – and caps the property tax deduction at $10,000. That means taxes on some homeowners will increase while the values of their homes decrease. The 617,000 filers who currently take the property tax deduction will see a net tax increase of $2.0 billion.
SALT alone is worth $7.7 billion to New Yorkers. For example, a married couple, filing jointly, with income of $200,000, one non-child dependent, and $37,500 in itemized deductions (of which $30,000 is SALT), would see their taxes increase by $970.
And while our middle class families struggle to pay taxes on the same income twice, the deduction remains fully intact for businesses.
The benefits in this bill are so unevenly weighted, the only taxpayers guaranteed a massive tax cut are businesses and large estates. Under this plan, business income receives a $1 trillion tax cut over ten years, adding to the Country’s projected $10.1 trillion deficit. For New Yorkers, you can safely assume these corporate handouts will eventually lead the White House and the bill’s authors to slash Medicaid, public safety and the affordable housing programs we desperately need.
Undermining Working Families
The elimination of several deductions will be immediately felt by New Yorkers in every borough. As a result of this plan:
- People with college debt – 250,000 filers in NYC alone – will no longer be able to deduct that interest from their federal income taxes. For example, a single filer with an income of $42,000, itemized deductions of $12,000, and $2,500 in student loan interest deduction, would see her taxes go up by $222 (+7%).
- New Yorkers struggling with exorbitant medical expenses will now pay more for necessary care. For example, a married couple filing jointly with $60,000 in income and $24,500 in itemized deductions (of which $18,000 is medical expenses) would see their taxes increase by $497 (+32%).
- Hardworking teachers using their own money on school supplies will no longer be able to deduct their expenses.
Additionally, beginning in 2023, working parents would no longer be able to exclude any child care expenses from their income. In New York City, at least 30,000 families currently take advantage of the exclusion, helping them plan daycare while they’re at work.
Unaffordable Housing
Housing is the number-one expense for New Yorkers. And more than half of households here spend more on rent than they can afford. Under this Administration, we launched the most ambitious affordable housing plan in the city’s history and are building and protecting affordable homes at an unprecedented rate. This tax plan threatens to pull New York City in the opposite direction.
By eliminating private activity bonds – the kind of tax exempt bonds our Housing Development Corporation and other housing finance agencies issue to fund new affordable apartments – we and cities across the country lose one of the principal building blocks of affordable housing. It doesn’t stop there, either. The loss also impacts the Low Income Housing Tax Credit, one of the largest federal affordable housing financing mechanisms. About half of the program would be effectively eliminated by repealing private activity bonds.
Taken together, this bill as written, threatens $2.6 billion annually, which would jeopardize thousands of homes financed each year for working families, veterans and seniors.
This doesn’t even account for the fact that when corporate and business taxes decrease, there will be less demand for tax credits, which means we can anticipate an even greater impact on the cost of building new affordable homes.
Stifling Innovation and Job Creation
Private activity bonds are not only used for affordable apartments, they’re also a tool that many hospitals, schools and other nonprofits use to finance projects and deliver services. Through the Build NYC program, this Administration has issued more than $3 billion in tax exempt bonds to support more than 20,000 jobs at dozens of New York City nonprofit organizations. The future of this work is at risk without this bond.
The bill also eliminates New Markets Tax Credits and Historic Tax Credits, effective and cost-efficient financing tools, which generate millions in private investment, create thousands of jobs and strengthen traditionally underserved neighborhoods. At The Brooklyn Navy Yard, four recent projects--the Green Manufacturing Center, Building 77, B Amsterdam and Sands Street-- are using these programs to leverage $348 million in total investment and create more than 5,000 jobs.
