Governor Andrew Cuomo’s stance on the Trump Administration’s cap on State and Local Tax (SALT) deductions has placed him in a strange position, in which the self styled progressive governor is suing the federal government because he believes the rich are being unfairly penalized by the tax cap. Of course, that’s not the way Cuomo writes the narrative. The governor is not going to admit he is fighting for tax breaks for the wealthy, even though that is what he is doing.
Instead Cuomo is alleging that the $10,000 limit on state and local tax deductions, which is part of the Tax Cuts and Jobs Act of 2017, is “an unconstitutional assault on states’ sovereign choices.” So instead of looking like a front man for the wealthy, Cuomo has assigned himself the role as champion of states’ rights. The last governor to do that was segregationist Alabama governor, George Wallace.
According to a statement from Cuomo, “The Trump Administration’s SALT policy is retribution politics — plain and simple. New York is already the nation’s leader in sending more tax dollars to Washington than we get back every year, and we will not allow this administration to pick the pockets of hard-working New Yorkers to fund tax cuts for corporations and send even more money to red states.”
Not only does Cuomo sound like a conspiracy theorist, he does not back up his statement with facts. Just as important, he ignores, as have the media and virtually everyone else, a new tax deduction in the Tax Cuts and Jobs Act that has helped New York State. The deduction is the Qualified Business Income Deduction (QBID), which is a 20% deduction off the net income (receipts minus expenses) of sole proprietor businesses and some small businesses. While there are some catches in the new deduction, it essentially provides a 20% tax deduction to businesses which are not corporations, as long as the owner’s gross income is less than $157,500 if single or $315,000 if married and filing jointly.
As the owner of a sole proprietor business, this is the first time in my 26 years in business that any local, state or federal tax deduction has benefited my business. I have to believe the QBID kept a number of New York state businesses from going under and increased the bottom line of others during 2018, the year it went into effect. According to New York State Comptroller, Thomas P. DiNapoli, in his 2016 report, The Economic Impact of Small Business in New York State, there are “1.6 million non-employer businesses in New York which are primarily self-employed individuals.” These are the people that QBID benefits along with many of the 451,000 small businesses in the state. Yet Cuomo has not said a word about QBID and how this part of Trump’s reform plan has helped New York State.
Many of New York State’s self-employed are not wealthy, but Cuomo would rather fight to restore tax deductions for the wealthy than to give Trump, actually Trump and Congress, any credit for tax deductions for the poor and middle class. And if states’ rights is really the issue, why hasn’t he filed a lawsuit arguing that QBID is also “an unconstitutional assault on states’ sovereign choices?”
It’s too early to say just how much more money is in the pockets of New Yorkers due to QBID. I know it put a lot more in mine, something New York State has never done for me. If Cuomo were honest he would admit that QBID goes a long way towards minimizing any negative financial effect on New York State from SALT limitations.
But in his blind hatred of Trump, Cuomo has chosen to ignore the positive impact of QBID on New York State. He should emulate it instead of ignoring it. It might go further to increase economic development in New York than the regional “hunger games” program that’s currently used. And it might increase his support among small business owners as well.
Even though Cuomo lost the first round of his lawsuit against the federal government over the SALT cap, he is appealing the decision. Like George Wallace, who eventually lost the states’ rights issues involving racial integration, Cuomo will eventually lose this states’ rights case as well. The federal government has the right to change its tax deductions through congressional legislation. It is hard to see how any argument Cuomo’s lawyers can come up with can effectively challenge that right.
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