Tax relief is a priority that I have focused on throughout my tenure as a state senator. While a number of successful measures have been adopted, this matter continues to be a leading concern. It is an issue that must be confronted on multiple fronts – lower property taxes, economic development incentives, and mandate relief to help local governments and schools control costs – are among the strategies I have and continue to pursue.
Now my senate colleagues are backing a state budget proposal that creates a broad-based tax cut plan to provide billions of dollars in tax relief to the middle class, seniors, and small businesses. The plan creates a new 25 percent rate reduction for middle class taxpayers, new tax savings to prevent seniors from leaving New York, and significant tax cuts for small businesses, farms, and other job creators.
The highlight of the tax plan is the new Middle Class Income Tax Relief Program that establishes the lowest middle class tax rate in more than 70 years. Starting in 2018, a total of 5 million eligible taxpayers – including more than 770,000 small businesses who file under the Personal Income Tax – would begin seeing savings. When fully implemented in 2025, middle class New Yorkers will pay a 25 percent lower tax rate and save $3.5 billion in taxes each year.
Right now, existing middle class tax cuts are set to expire in 2018 and the tax rate will jump to 6.85 percent. This results in an annual cost of $155 on average to middle class taxpayers, totaling $700 million per year. The Senate Majority’s plan eliminates this expected middle class tax increase, and phases in a 25 percent tax rate reduction to 5.14 percent when fully effective. This will save middle class taxpayers an average of $897, for a total of $3.5 billion per year in 2025 and thereafter.
Taxpayers eligible for the savings include: single filers with taxable income between $20,000 and $150,000; heads of households with taxable income between $30,000 and $225,000; and married joint filers with taxable income between $40,000 and $300,000.
The budget proposal will also give more financial security to senior citizens. The tax cut would provide the first increase to the exempt amount of private pensions and retirement income since 1981, saving approximately $275 million annually when fully phased in.
For 35 years, seniors have been able to claim the first $20,000 of pension or retirement income as exempt income. The Senate Majority’s proposal increases that exempt amount to $27,000 in 2017, $34,000 in 2018, and $40,000 in 2019. This would provide tax relief to more than 377,000 seniors and, in the first year alone, would save each an average of $361.
The tax cut plan will expand small business tax cuts that were enacted in 2013 to provide even more tax relief to help entrepreneurs grow and create jobs. Further, to encourage small businesses and farms to pass down their business from one generation to the next, the senate is proposing to speed up the full phase-in of estate tax reform first enacted in 2014.
One of the first questions I have been asked in regard to the tax cut plan is how to pay for it. I say, continued spending restraint by the state is part of the solution along with projected economic growth.
Currently state government is operating under a voluntary two-percent spending cap. I for one would like to see this cap made permanent and enacted in law to ensure fiscally sound budgets will continue. It is also projected that income tax cuts, like those proposed in this plan, along with other strategies will help stimulate our state’s economy generating growth and more tax revenue.
There is no one magic solution. However, this tax relief plan, working in conjunction with other strategies, can play a significant role in improving individual finances and our state’s collective future.