NYC Faces Pressure to Extend State Tax Cuts, IBO SaysMartin Z. Braun
New York City will come under “great pressure” to extend tax cuts for banks that were approved in the state budget, a move that may cost hundreds of millions of dollars, the Independent Budget Office said.
A state budget deal passed March 31 eliminates the bank tax and extends the corporate tax to cover banking corporations. The city, which has its own income tax for banks, will face pressure to adopt the state change to ease compliance for banks subject to both levies, George Sweeting, IBO deputy director, wrote in a blog post. The IBO is a nonpartisan city agency that acts as a fiscal monitor.
“The challenge for City Hall will be navigating between the arguments for the economic benefits of moving to a simpler and easier tax system for financial firms and the likely loss of tax revenue needed to fund the de Blasio administration’s agenda,” Sweeting wrote, referring to Mayor Bill de Blasio, who took office in January.
Because of the changes, New York state will lose an estimated $205 million in the next fiscal year, a figure that will grow to more than $500 million after three years, the IBO said. Using the state’s projections, the IBO said the city could lose hundreds of millions of dollars if it eliminates the bank tax. New York City’s combined bank and corporate taxes will generate more than $4 billion in the fiscal year ending June 30, 2015, according to the IBO.
Governor Andrew Cuomo and the legislature must approve any changes to the city’s business taxes. They defeated a plan by de Blasio to raise income taxes on those earning more than $500,000 to fund universal pre-kindergarten and after-school programs. Instead, the state allocated $300 million for universal pre-K in the city as part of the budget.