New York Governor Andrew Cuomo, during his budget address, formally proposed the New York State Taxpayer Protection Act, which would shift many state-level income taxes to a payroll tax that businesses can deduct, framed as a way to avoid the new $10,000 deduction on state and local taxes, according to Bloomberg. While the actual legislation, which has yet to be released, would go into the matter in finer detail, the governor said that wage earners would no longer be subject to state income tax. Businesses would pick up the slack by paying a wage tax that, presumably, would be passed onto the employee in a similar manner to Medicaid or Social Security taxes. Employers would then be able to take full deductions for these payroll taxes. Bloomberg said the plan would only apply to wage earners, meaning that other sources of income, such as investment gains, would continue along a personal income tax system. 

The governor first brought up the plan during his State of the State address at the beginning of the year. He said the measure would be in response to the capping of the state and local tax deduction at $10,000, which came about due to the GOP tax bill signed into law in December.  Cuomo said that limiting this deduction effectively raises New Yorkers' taxes by 20 to 25 percent across the board, when the state already gives $48 billion more to Washington than it gets back. The governor said there is no possible justification for this except naked partisanship. The new tax law, he said, is "robbing the blue states to pay for the red states."

During his budget address, the governor also said he wants to create state charitable funds for education and health care, allowing taxpayers to deduct even more through their donations. He also wants to defer tax credits for companies receiving $2 million or more in credits for one year. This deferral would, he said, raise $300 million in state revenue, and the benefits companies receive from the federal tax plan would more than make up for the loss on the state level. 

Legislators, however, are unsure whether these changes have enough political support to pass, according to Newsday. Beyond being technically challenging, a switch to a payroll tax system might be a hard sell in the legislature in general, and the Senate in particular. However, Assembly Speaker Carl Heastie (D - Bronx) said that the state needs to do something in response to the federal tax changes, according to the Albany Times Union, because doing nothing means letting "the federal government just continue to pick the pockets of New York state." 

Other tax measures outlined in the proposed budget include: 

* Increasing the credit for hiring disadvantaged young people from $500 to $750 a month for up to the first six months and from $2,000 to $3,000 for each worker employed for additional time after six months up to $7,500. 

* Expanding the sales tax exemption for vending machine items costing $1.50 or less to $2.00 or less. 

* Treating carried interest as ordinary income for New York state tax purposes, as well as imposing a fairness fee to eliminate the benefit from preferential tax rates at the federal level (though this measure would only take effect when identical legislation is enacted in Connecticut, Massachusetts, Pennsylvania and New Jersey). 

* Creating an Internet Fairness Conformity Tax, which requires marketplace providers to collect sales tax when facilitating third-party sales to New Yorkers regardless of whether the seller is in or out of New York. Currently, the tax needs to be collected only if the seller is in New York. 

* Allowing the Department of Taxation and Finance to appeal tax appeals tribunal decisions. 

* Clarifying NY residency requirements (though the briefing book does not clarify exactly what would be clarified)

*Discontinuing the energy services sales tax exemption. 

* Providing sales tax relief for minority LLC owners, where tax liability is based on percent of ownership, rather than full tax liability. 

* Converting the current sales tax credit or refund on resale of prepared food to an upfront exemption. 

* Converting the veterinary sales tax credit into an exemption. 

* Converting the existing ad valorem tax on state-owned lands into a payment in lieu of taxes program, set at existing amounts, that would increase each year by the allowable levy growth factor for the property tax cap. 

* Extending the statute of limitations on amended tax returns to three years after the filing date of the amended return, versus three years after filing the original return. 

* Making it so that the Department of taxation and Finance get the same quarterly employer wage reporting that employers currently provide to the Department of Labor. 

* Allowing warrantless tax debt to be assigned against unclaimed funds. 

* Extending the statute of limitations for taxpayers to file a real estate transfer tax refund claim from two to three years. 

* Making participation on the Income Verification Program mandatory for those looking to keep their Enhanced STAR exemptions. 

* Requiring manufactured home parcel reporting (right now, the tax department only gets information when sales occur on manufactured homes, but not when there are other status changes). 

* Requiring the filing of real property transfer reports upon the sale of cooperatives and shares in a corporation that owns real property. 

* Imposing a 10 cent-per-fluid-milliliter on vapor products at the distributor level, which equalizes tax treatment of tobacco products. 

* Imposing a new 2 cents-per-milligram tax on active opioid ingredients on prescription drugs, with all proceeds going to the new Opioid Prevention, Treatment and Recovery Fund.