Analysts say President Trump’s new tax proposal to eliminate a popular deduction could cost the Long Island economy billions.
The controversy is about proposed elimination of the deduction of state and local taxes for the federal tax return. The president would double the standard deduction instead.
The proposed tax outline would cost the average Long Island taxpayer anywhere from $1,000-$4,000 per year according to the Long Island Association Research Institute.
Matthew Cohen of the Long Island Association says it could cost the Long Island economy $1.5 billion.
“It's going to drag down the economy, and it’s going to hurt the real estate industry, and it's going to mean more money out of the pockets for Long Islanders and going to the federal government.”
Cohen says that the proposal to eliminate the deduction won’t see the light of day.
“I think that the proposed elimination of state and local taxes from your federal tax returns is dead on arrival. I don’t see how any legislators, members of Congress, senators, I don’t see how anyone, whether they be Democrat or Republican, I can't see one of them voting for a bill that includes eliminating it.”
E.J. McMahon, research director at Empire Center for Public Policy, a fiscally conservative think tank in Albany, says that the policy isn’t dead on arrival.
“The battle over the itemized tax deduction for state and local taxes is going to be a much tougher one for New York, Connecticut and Jersey and a few other states than it was 30 years ago because their political influence has waned and the political deck is more stacked against them this time around.”
However, he agrees that local residents will see little or no tax relief under the president’s plan.
The deduction largely benefits high-income, high-tax states like New York, California and Connecticut. New Yorkers claim nearly $68 billion every year in federal tax return deductions.