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Highlights of the New York State Budget 

Albany, New York is the capital of the great State of New York.  As such, it’s seen more than its fair share of rough and tumble negotiations.  These are often between the “Second Floor” (aka, the Governor’s Office) and the New York State legislature.  This year’s New York State budget didn’t disappoint.  Today, the budget is the focus of this Albany tax attorney blog post.

The Budget:  A Product of Negotiation

The New York State budget is the product of negotiation.  Like any good negotiation, it took a great deal of time, energy and focused effort to bring together. Negotiation skills can be a tremendous benefit in virtually any sector of society.  They are, however, particularly useful in the world of politics. In politics, a skilled negotiator can make the difference between a failed bill and successful legislation.  Or between failed diplomacy and successful diplomacy, a strong budget and a weak budget. On April 1st, the latest New York budget took effect after being negotiated and pushed through by Governor Cuomo. The New York State budget, of $168.3 billion, required a great deal of negotiation to put together, and responds to numerous issues within New York State while also responding to the many changes to the federal tax code implemented by Congress.  

Healthcare and Education

As this article will discuss, the two biggest areas of concern for the New York were healthcare and education.  Plenty of other areas were affected as well. Nonetheless, the budget failed to include a number of changes which were considered to be high priority.  These include closing the LLC loophole for political campaign contributions (explained in detail below). Governor Cuomo’s opponents have used the alleged budget shortcomings to undermine the governor’s credibility.  Of course, they also want to generate sympathy for their own agendas. Notably, expected gubernatorial challenger Marc Molinaro expressed his disapproval.  That was done in a tweet soon after official announcement of the budget. 

In this article, we will discuss in detail the highlights of the New York State budget.  We’ll also reference some of the key matters left out. The current New York State budget is certainly imperfect.  That’s all we can reasonably expect, of course.  Nonetheless, it has many promising features.  Overall, it should have an overall positive impact for the residents of our great State. 

Responding to Changes Made on Capitol Hill 

Several aspects of the New York State budget are direct responses to changes made at the federal level. In his Tax Cuts & Jobs Act – discussed in detail in one of our earlier articles – President Trump reduced certain state and local tax, or SALT, deductions. Under the Act, state and local taxes, plus real property taxes, are now only deductible up to a married combined limit of $10,000. The home mortgage interest deduction has likewise been limited.  It now caps out for interest on loans up to $750,000 for married filers.  For single filers, that limit is $375,000. Both apply to  mortgages taken out after December 14, 2017. 

Enter Charitable Contribution Funds

To combat these reductions, the  New York State budget now allows taxpayers to divert some of their tax burden.  It’s done through the use of two newly-created charitable contribution funds for healthcare and education. When New Yorkers send funds to one or both of these funds, they’ll be able to claim a corresponding tax credit on their return. Because the tax reductions in the federal act affect individual taxpayers specifically, the New York State budget also includes an “alternative employer compensation expense program” so that businesses can implement a payroll tax which would be offset by a state tax credit for their employees. 

Healthcare & Education 

 The total amount allotted to education in the new budget is $26.7 billion; a large slice of the $168.3 billion budget pie, and the single largest item in the budget by a wide margin. This figure for education is the result of negotiation between the State Board of Regents requested increase of $1.6 billion and  Governor Cuomo’s proposed $769 million increase.

The new budget also assigns $18.9 billion to Medicaid, as well as a $100 million fund to support an “opioid stewardship program.” This healthcare funding is the second largest item in the budget behind only education. Interestingly, the healthcare portion of the budget includes a new controversial tax on the sale of “Fidelis,” which is a Catholic-run health plan.  

Items Missing from the New York State Budget 

There were several significant items missing from the new budget. Perhaps the most noteworthy is eliminating the “LLC campaign contribution loophole.” Under New York law, campaign contributions from individuals have limits.  However, donating campaign contributions through an LLC allows individuals to skirt the limitation. Accordingly, many individuals simply establish limited liability companies to evade the law.  Its repeal isn’t in the budget.

Other items left unapproved include the internet sales tax, the Child Victims Act, bail reforms, congestion pricing (except for the modest surcharge added in certain parts of Manhattan) and early voting. Of course, plenty of other things were left out as well, but these are a few of the more notable missing items. 

Call Our NYC Tax Attorney for Clarification

No matter how great his negotiation skills, there’s no way that Governor Cuomo could  implement his “ideal” budget without negotiating changes.  While the 2018 – 2019 New York State budget has its strengths, we’re hopeful New Yorkers will be better off as a result of its passage. Here at Mackay, Caswell & Callahan, P.C., our attorneys work hard to stay up-to-date with current issues.  These include New York State matters in particular, as they affect our clients. If you have a tax problem and need assistance from a top Albany tax attorney, don’t hesitate to give us a ring today! 

Image credit: John St John