LEGISLATIVE AFFAIRS: A Closer Look at a Possible Payroll Tax in New York
Philip Weiden | January 30, 2018
Governor Andrew Cuomo in his State of the State address and in his budget address earlier this month called for a new payroll tax system to be implemented in New York. In his remarks, he unveiled two proposals. One was to completely eliminate the income tax with a payroll tax so that an employer could use the deduction on federal taxes as this provision did not change in the new law passed by Congress. The other proposal would have a two-tiered system wherein a company could choose to either pay their employees using the payroll tax or use an income tax system as there is now.
The payroll tax taxes employees and employers. On the employer side, the employer deducts the appropriate amount prior the employee receiving their pay. Right now this remains deductible on the employer side. However the issue with instituting a payroll tax is that one already exists on the federal side to pay for Social Security and Medicare. Instituting a payroll tax on the state level would also require several years of implementation otherwise it could create problems since a new federal tax law is just being implemented.
In theory a choice would be nice, however, another question would be whether or not there would be a revenue loss to the state, which is currently facing a $4.4-billion deficit. I think most people would agree that any new tax change would need to be phased in over several years so as not to cause an even bigger disruption than what we are now seeing.
It is important to take all of this into consideration when we implement a new tax structure. What matters most in any massive change is the implementation and not necessarily the rates.
We highly recommend that you talk to your accountant or your tax advisor about how to file your taxes in 2018 and 2019. Stay tuned for further updates on this issue.