Created: April 19, 2021 11:20 PM
ROCHESTER, N.Y. (WHEC) — Gov. Andrew Cuomo is calling his tax plan an important part of helping New York recover from the economic damage of coronavirus.
On Monday, he signed a bill that raises taxes on higher-income New Yorkers and cuts them for middle-income earners.
“We also have to help the middle class, especially at this time,” he said as he signed the bill. “And the best way we can help them is through lower taxes.”
As the state struggles with the effects of COVID lockdowns, the governor explained that leaving taxpayers more of their money would get more people out spending.
“This tax change affects 4.8 million New Yorkers,” Cuomo said. “And it’s $2.2 billion. So it is real.”
“Tax cuts always sound great,” said Financial Advisor Chuck Wade of Brighton Securities, praising any reduction in taxes but question how much the bill would help.
For most middle-income earners, making between $21,400 and $80,650, the state income tax rate would go down just under 2% from 6.09% to 5.97%. For those making $80,650 to $215,400, the rate would drop from 6.41% to 6.33%.
“Let’s say you’re a family of two with a combined income of $80,000 a year,” Wade said. “It probably means you’ll pay $80-$100 less in state taxes over the course of 12 months… Yeah, it’s a pretty small reduction when you look at the percentage.”
The plan also raises the tax rate on top earners by more than 20%, up to 10.9%.
Cuomo says that could be offset by the federal government if it gave New Yorkers a bigger federal tax deduction on their state taxes, and he demanded that change. That deduction was reduced as part of the Trump administration's tax cuts but so far the Biden administration hasn't pushed to change that.
But will a 2% tax cut help the COVID-battered economy?
"The textbook says that, if you are paying less in taxes, it's that much more likely that you'll go out and spend more money,” Wade said. “In reality, there may be a reduction in what people are paying in taxes but I don't know that it's significant enough to really spur spending in the economy."
Copyright 2021 - WHEC-TV, LLC A Hubbard Broadcasting Company