andrew-cuomo Gov. Andrew Cuomo. Photo credit: Shutterstock

ALBANY—The Cuomo administration issued preliminary plans for a state payroll tax in an effort to stave off some effects of the federal tax overhaul signed into law by President Donald Trump.

Gov. Andrew Cuomo's Department of Tax and Finance issued a report Wednesday afternoon on possible ways to overhaul the state's tax structure. One of the proposals in the report would keep the state's current income tax and levy a payroll tax on employers based on each employee's tax withholdings.

“Relying more on employer-side payroll taxes and less on personal income taxes could, therefore, allow states to mitigate the negative impacts of the federal law,” the report said.

A proposal to impose a payroll tax on employers, which is still legally deductible on federal taxes, would be an effort to stave off some effects of the federal tax overhaul on New York residents, many of whom stand to lose some of their state and local tax deductions.

The tax overhaul Trump signed in December caps a deduction for state and local taxes at $10,000—the deduction was previously unlimited—which may increase the federal tax liability for many homeowners in high-tax states such as New York and New Jersey.

Another proposal included in the report would require that employers calculate the payroll tax under a new system that would “reflect net wages, exemption allowances and new employer compensation.” Employees would then file their income taxes and get an income tax credit equal to the amount that was deducted from their paychecks to cover the payroll tax.

A separate proposal would do away with the income tax and instead offer a credit to employers.

In a statement, Cuomo called the report a “blueprint” for the upcoming budget negotiations. A final spending plan is due by April 1.

“With this blueprint as a foundation, we will work with experts, the Legislature, employers, taxpayers, and other stakeholders to develop and implement changes to the tax code that protect all New Yorkers. I will not stand by as partisan politics in Washington seek to threaten the people of this state,” the Democratic governor said.

Cuomo's plan to shift to a payroll tax “makes no sense,” said state Sen. John DeFrancisco, the deputy majority leader, adding, “most people are going to be helped” by the federal tax overhaul.

“You're going to go through a whole new system and have the existing system of income taxes at the state tax department—both of them going at the same time—and you're correcting a problem that won't even affect 85 percent of the people. So it makes no sense,” DeFrancisco, R-Syracuse, said.