Will Tax Changes Drive New Yorkers to the Polls? Probably Not
Posted June 10, 2018 11:16 p.m. EDT
In the months since the Republican overhaul of the federal tax code, New Yorkers have seen widespread perplexity, frantic revision of their state tax code — and a steady drumbeat of rhetoric from Democratic and Republican leaders who have vowed to use the plan as a rallying cry at the polls this fall.
“We’re going to hold every Republican in this state accountable in November for their tax assault on New York,” Gov. Andrew M. Cuomo pledged while accepting the state Democratic Party’s nomination last month.
But outside of convention halls and political rallies, as the initial tumult of the tax rewrite has subsided, the response from many New Yorkers — across parties, income levels and geographic regions — appears to be something of a shrug.
“Not unless I snap or something,” said Mark Shaheen, owner of Seymour June House Art & Antiques in Fayetteville, a village in Central New York, when asked if the changes would drive him to the polls.
One reason for the political thud may be logistics.
Cuomo and other Democrats framed the state’s workarounds, passed in the state budget in March, as necessary schemes to save New Yorkers from an “economic missile.” That missile was the sharp federal reduction in the deductibility of state and local taxes — a burden that would fall heavily upon the residents of high-tax states such as New York.
But tax lawyers suggested that the details of the state’s workarounds were too convoluted for the average taxpayer to follow closely, or too untried to have an effect — either as campaign talking points or as financial safeguards.
Indeed, in late May, the IRS announced that it would issue new regulations addressing “state efforts to circumvent” the new law, a move that could dampen Democratic proclamations about dodging the rewrite — or add fresh fuel to their rhetoric about Republicans’ New York-centered vendetta.
Even if the workarounds are upheld, it remains to be seen how many people take advantage of them.
Joshua Gewolb, a Rochester-based tax lawyer whose clients are primarily small businesses, said he had clients who had expressed “curiosity but not serious interest” in the option to replace the employee-side state income tax with an employer-side payroll tax, which remains fully deductible.
“There was so much drama about it, and the governor’s rhetoric was really, really strong,” Gewolb said. “And then when the bill came, I feel like it landed with a little bit of a whimper. We just didn’t have the phone ringing with questions about it.”
The true cost of the new federal cap on state and local deductions cannot even be calculated until taxes are filed next year. The same applies to the efficacy of the state’s attempt to help taxpayers skirt that cap.
Since its passage, the Republican tax overhaul has actually grown in popularity in New York: According to a poll conducted for The New York Times by SurveyMonkey, 42 percent of New Yorkers said they approved of it in May, up from 35 percent in December.
Republicans have tried to seize upon that growth, promoting the federal changes as an economic engine.
In May, Rep. John Katko, a House member from Onondaga County who is considered one of the most vulnerable Republicans in Congress, appeared at a food distribution company in Liverpool, where company leaders highlighted the $500 bonus employees received after the plan’s passage. Rep. Tom Reed of Western New York has donned a green apron at a Jamestown Starbucks to chat with employees about pay raises they had received after the rewrite.
But even Republicans conceded that the tax changes would not be the primary driver in the coming elections.
“I think it’s a good thing to have” as a talking point, said Michael Sigler, chair of the Republican Party in Tompkins County, which is represented by Reed. “But when it comes down to it, really local issues — all the way down to local septic systems — it’s those little things” that would shape races for the state Senate and other seats.
Even in swing counties, some of which the cap was expected to hit hardest, the response has been mixed. In Nassau County on Long Island, which has among the highest local property taxes in the nation and where voters split almost in half for Hillary Clinton and President Donald Trump in 2016, Democrats had warned of a possible exodus of millionaires and a slowdown in the real estate market.
But realtors there said sales appeared stable. People looking to a buy multimillion-dollar mansions would not be deterred by an increase of even thousands of dollars in property taxes each year, said Soheila Sharf, who sells luxury homes in Nassau County. “They’re so wealthy that it doesn’t matter.”
Some professionals, such as doctors or lawyers, who previously could have deducted their property taxes to blunt the cost of living in such a pricey neighborhood, might be more reluctant, Sharf said. But some buyers at that income level were also using the tax burden to barter down home prices.
“People are using this as a tool for negotiation,” she said.
In fact, a study commissioned in March by Redfin, a national real estate brokerage, found that 31 percent of homebuyers in the New York City area had begun searching for more expensive properties because of additional income from the new tax law, compared with 19 percent who said they had begun looking for homes in states with lower taxes. Eighty percent of respondents earned between $50,000 and $150,000. Perhaps the biggest reason the tax reforms may get overlooked this fall is timing.
The elections are too far ahead of the filing deadline for next year, when the tax changes’ full effect will become apparent, said Richard Bensel, a political-science professor at Cornell. And they are too far behind the initial enactment of the changes this year, when voters might have been excited by the income bump, however small.
Steven C. Kyle, an economics professor at Cornell, said the rapidity of the news cycle would likely push the tax issue far to the back of voters’ calculations.
“We are likely to have way bigger and more immediate news,” Kyle said, “that will erase this from the front burner of public consciousness.”