In response to new federal law limiting the deductibility of state and local income and property taxes at a maximum of $10,000 NY has approved a fiscal year 2019 budget containing provisions to lessen the impact.

It is important to note these changes do not reduce taxes for NY taxpayers.  Instead they shift the burden from the newly-limited state and local and income and property taxes to payroll taxes and charitable contributions which were untouched by the new federal legislation.

  1. Although the current personal income tax system would remain in place employers in NY may choose to participate in a new voluntary payroll tax system known as the Employer Compensation Expense Program (“ECEP”).
    • Businesses that participate in ECEP would be subject to a 5% tax on all annual payroll expenses in excess of $40,000/employee.
    • The tax would be phased in over three years beginning January 1, 2019.
    • A new tax credit corresponding in value to the ECEP would cut the personal income tax on wages ensuring taxpayers will not see a decline in take-home pay.
  2. A new state-run charitable contribution fund will replace property taxes.
    • Taxpayers can pay money to support health care and education.
    • Donations to these funds would provide a reduction in local property taxes via a local credit equal to a percentage of the donation.