Most taxpayers in Onondaga County generally paid less in federal income taxes in 2018 – the first year under the new rules of the big federal tax overhaul, new IRS records show.
County residents paid overall 3% less in federal income taxes in 2018 compared to 2017, the data shows.
Changes in dollars paid to the federal government between 2017 and 2018 cannot all be attributed to the 2017 Federal Tax Cuts and Jobs Act. Like all years, individuals made more or less money in types of income that are taxed differently. These comparisons are measured in total dollars, not rates, and they do not track changes for specific taxpayers.
Still, a look at the way whole groups of people filed their income taxes in 2018 gives some indication of how an important and complicated change in federal policy hurt or helped people in Onondaga County.
Data from the first year under the new rules shows:
- Filers in every tax bracket up to $200,000 paid a lower total dollar amount than they did the year before. That drop is highest for people who made between $10,000 and $25,000. As a group, they paid 31% less in 2018.
- Taxes on the wealthiest taxpayers increased slightly, but that could reflect higher earnings for a small group of people.
- As predicted, thousands of filers took the higher standard deduction instead of itemizing deductions for things like property taxes and charitable contributions. More than 4 times as many people quit itemizing. Unlike Downstate counties with high property taxes, the inability to deduct property and income taxes did not matter to most Onondaga County residents.
| Size of adjusted gross income 2018 | % change in tax dollar amount over 2017 |
|---|---|
| $10,000 to $25,000 | -31% |
| $25,000 to $50,000 | -19% |
| $50,000 to $75,000 | -14% |
| $75,000 to $100,000 | -13% |
| $100,000 to $200,000 | -5% |
| $200,000 or more | +5% |
E.J. McMahon, a senior fellow at the Empire Center, said the numbers push back against Gov. Andrew Cuomo’s claim that federal tax reform is costing New Yorkers billions of dollars.
Cuomo has said New Yorkers would have to pay $15 billion dollars more in federal taxes because they could no longer deduct all of their state and local income taxes and property taxes under the new rules.
The deduction of these taxes, often referred to as “SALT” taxes, are now capped at $10,000.
A Post-Standard/Syracuse.com analysis at the end of 2017 showed why that change was unlikely to cost many taxpayers in Central New York.
That’s because state and local income taxes and property taxes for most people don’t add up to $10,000. And they would be covered by the new higher standard deduction. It wouldn’t make sense to itemize.
The average real estate tax deduction in the county was $6,653 for the one-third of filers who itemized in 2016.
Not all parts of New York are equal when it comes to paying property taxes. The average real estate deduction in Westchester County was $15,033 before the tax code changed, records show. That likely contributed to an increase in federal income taxes in wealthier Downstate counties, McMahon said.
Filers have two options when they fill out their tax returns:
They can take the standard deduction — a number that’s the same for all single filers or all household filers. Or if deductions like property taxes would add up to more, they can itemize those deductions one by one.
The tax overhaul doubled the standard deduction from $6,500 to $12,000 for individuals and $13,000 to $24,000 for joint returns.
Before the tax code changed, 80% of filers in Onondaga County took the lower standard deduction.
After the tax overhaul, the number of filers who chose to itemize deductions dropped from 72,350 to 15,990, records show. So in 2018, only 7% of filers itemized.
Even two-thirds of the people in the wealthiest bracket – those who made more than $200,000 – did not itemize their deductions for 2018 taxes, records show.
It is impossible for economists to know how much the higher standard deduction helped people without looking at individual tax returns, which are private. If a filer’s deductions hovered around $23,000 – just under the new limit – the higher standard deduction would not help much.
If the filer would have had only a few thousand dollars in property taxes or charitable contributions, the new higher standard deduction would be a huge reduction in taxes.
The enormous drop in itemized deductions is a “sea level” change from 2017, said Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy.
But it does not mean the extra benefits were gigantic for everyone, he said.
“All we know for sure is that a lot of New Yorkers and a lot of Americans, including some fairly well-off Americans, benefited at least a little bit from taking the standard deduction instead of itemizing,” he said. “We just don’t know how big the bang for the buck is.”
Gardner said it is too soon to measure the long-term effects of the 2017 tax overhaul. Changes in taxpayer behavior could present a whole new set of numbers next year. Already, states are working on ways to get around the SALT tax limit.
Early on, some homeowners employed a strategy to avoid losses in 2018. They paid two years of property taxes in 2017 to avoid the cap in 2018.
Cuomo’s staff says that makes the 2018 IRS data meaningless.
The governor’s office estimates that each $1 in additional federal tax burden created by the SALT cap lowers New York’s economic output by $1.17. Cuomo puts that loss at $15 billion, reflecting a loss of economic activity caused by money no longer available for households to spend.
Cuomo is not the only politician arguing to lift the SALT tax cap. Congress has passed legislation to remove the cap. Sen. Chuck Schumer, D-NY, said it would be one of the first things he does if he becomes majority leader.
Two economists for the Brookings Institute argued in a recent New York Times opinion piece that the SALT tax deduction is a handout to the rich and should be eliminated.
Even with the $10,000 cap, three-quarters of the benefit goes to families in the top fifth of income distribution, they said.
Gardner explained the reason why a liberal Democrat would defend a tax break that appears to help only the rich.
There is a broader picture to consider, he said.
The ability to deduct state and local taxes from federal taxes, a practice that is more than 100 years old, is essentially a way for the federal government to help states and local governments raise money.
The alternative would be for the federal government to write a direct check to states. That would be politically unpopular and an unreliable way for states and cities to count on money.
Those who defend the practice are not thinking about who directly benefits from lifting the cap, but about how everyone benefits from more money for state and local governments, he said.
Contact Michelle Breidenbach | mbreidenbach@syracuse.com | 315-470-3186.
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Did Onondaga County residents win or lose in first year of U.S. income tax reform? First stats are in - syracuse.com
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