A similar idea described in “The Games They Will Play,” a paper published in December by 13 tax experts, suggested states could replace income taxes with a new payroll levy. States would collect the same revenue, and employers would reduce wages so workers take home the same amount.
More Effort
Such a plan would require more effort to design and implement compared to accepting gifts in lieu of taxes, said David Kamin, a professor at New York University School of Law. Still, a payroll tax would offer greater tax savings to state residents by allowing non-itemizers to benefit from the change. It could be harder for the federal government to undo than California’s plan. Those who favored cutting the deduction say that it encouraged states to increase taxes because of the indirect subsidy by Washington. Opponents of the new cap argue that states like New York and California already pay more in federal taxes than they get back in federal spending.
“Washington’s tax plan uses New York and California as piggy banks to finance tax cuts for Republican states,” Cuomo said Jan. 3 in his annual state of the state address. “We must take dramatic action to save ourselves and preserve our state’s economy.”
This article was provided by Bloomberg News.