Describing the Trump administration’s tax reform plan as “written by millionaires, for millionaires,” New York City Comptroller Scott Stringer released a stinging report that paints the proposal as a handout for New York City’s elite.
According to the study, which took into account 365,000 income tax records for filers in New York City, the plan will disproportionately benefit high-income earners. Under the plan, households with an adjusted gross income of over $500,000 will get significant tax reductions through the elimination of alternative minimum tax, which was meant to prevent wealthy taxpayers from avoiding taxes through loopholes, and lower marginal tax cuts on ordinary and capital gains income.
Meanwhile, more than one-third of moderate and middle-income families will be subject to tax increases.
“This is a gift to the Mar-a-Lago crowd. It’s written by millionaires, for millionaires and it will be paid for by the rest of us through brutal cuts in federal spending. It comes at a time when we have an income inequality crisis like never before in America, when we need to be a country where everyone pays their fair share. Instead, the proposed elimination of the Alternative Minimum Tax demonstrates that President Trump’s plan aims to benefit himself and people like him,” Stringer said in a statement.
The tax plan, which is currently a one-page “first draft,” also has provisions for eliminating state and local tax deductions, which many New Yorkers rely on to offset the cost of high taxes. According to IRS data from 2014, 34.2 percent of New York taxpayers claimed state and local tax deductions. Meanwhile, the White House is looking to keep tax deductions relating to mortgage interests.
The deduction has often been criticized for benefiting the wealthy rather than the middle-class. The deduction can only be taken when taxpayers itemize, which tend to skew towards wealthier Americans. If not, taxpayers must take the standard deduction.
According to Heidi Learner, the chief economist of Savills Studley, the combination of these factors may hurt people in places like New York. “In raising the standard deduction to twice its current level (to $24,000 for married couples), the new tax proposal would eliminate all other deductions–including the ability to deduct state and local taxes,” she said.
“Individuals who live in high tax states like California and New York, and who are assessed a municipal tax on income—as in the five boroughs of New York City, may face higher tax bills. Similarly, single-family home prices in areas where property tax bills are high may also take a hit, as property taxes will no longer be deductible.”
According to Stringer’s report, the proposal would provide $5 billion to New York City taxpayers annually. However, more than two-thirds of that total will go to filers who make $500,000 or higher.
Nearly half of single filers with incomes between $100,000 to $500,000 and one-third of households that make between $50,000 and $250,000 will lose under the plan. Meanwhile, 40 percent of single parents would pay more in taxes.
This includes 47 percent of single parents who make $25,000 to $50,000 and 75 percent of single parents with incomes between $50,000 to $100,000.
“For New York City, with the potential elimination of local and state tax deductions, this plan would do serious damage. This isn’t a plan to deliver growth – it’s a recipe to destabilize our economy and widen the gaps between the wealthiest and those most in need,” Stringer said.