By Stephen J. Kotz
With the massive, Republican-backed tax bill all but assured of being passed by Congress and signed into law by President Donald J. Trump before year’s end, a growing chorus of Long Island voices is sounding the alarm that unless major revisions are made to it, the measure will have dire consequences for Long Islanders and the region’s economy.
This week, Suffolk County Executive Steve Bellone, in a conference call with local reporters, asked voters to sign a petition, available on the county’s Facebook page, urging the president — who has made cutting taxes a priority and has yet to score a legislative victory in his first year in office — to reverse course and veto the bill. “Our focus has been and is on President Trump who has the power and authority to stop a bill that could be catastrophic for Long Island,” said Mr. Bellone, a Democrat. “The president does pay attention when he’s made aware of things in the media.”
Republican U.S. Representative Lee Zeldin, who typically supports his party’s initiatives, said this week, he remains steadfastly opposed to the measure. “I don’t like the way this bill is picking winners and losers,” he said. “It’s a geographic redistribution of wealth that is taking money from New York to pay for deeper tax cuts elsewhere.”
“It’s well documented that New York State is already a donor state in the amount of money we pay to the federal government,” added Assemblyman Fred W. Thiele Jr., a member of the Independence Party, who said the bill’s biggest benefactors will be the wealthiest Americans. “I don’t think there is any question the primary focus of the bill was to reward the donors to the Republican Party.”
Although the tax bill will slash corporate tax rates as well as those for many individuals, it also sharply reduces the amount of money individual taxpayers can deduct for expenses like mortgage interest and state and local taxes. But in parts of the country, such as Long Island, with both high housing prices and incomes, those changes can result in higher taxes being paid by many individuals.
Mr. Bellone said the measure would drain an additional $3 billion a year from Long Island, which already contributes $23 billion more in federal taxes than it gets back. He said housing experts have predicted the measure could cut housing values by up to 20 percent and add a new burden to individuals in the form of higher federal taxes averaging $7,700 across all income levels.
Before the legislation becomes law, the differing bills passed in the House last month and in the Senate last week must be reconciled by a conference committee made up of members of both chambers. Mr. Zeldin said if that committee “took the best part of both bills and combined them,” it might be able craft a reasonable compromise.
Critics, for example, have skewered the version passed last week by the Senate because it will add an estimated $1 trillion to the nation’s $20 trillion debt over the next 10 years while cutting the corporate tax rate from 35 to 20 percent. “Everyone is talking 20, but maybe it should be 22,” Mr. Zeldin said. “Every point is $100 billion.”
“It seems like a good attempt to simplify the tax code, but it does it in a way that is going to imply a drop in revenue, which is not a good idea right now,” said Professor Juan Carlos Conesa, the chairman of the Department of Economics at Stony Brook University. He added that with many Long Islanders paying more in taxes, “it’s going to make it less socially attractive to generate revenue for state and local government.”
Professor Conesa added that the Republican assumption that lower corporate tax rates will result in a stronger economy, is not borne out by the facts. “Large corporations are not going to engage in greater investment and hiring just because taxes are low,” he said. “It’s a very slow process.”
Kevin Law, the president and CEO of the Long Island Association, which promotes business on Long Island, said the tax bill will have a negative impact on consumer spending here, which, in turn, would reduce sales tax revenues.
“On Long Island, we are sort of house rich and cash poor,” he said. “When people feel good about the value of their house, they have more confidence in the economy and tend to spend more money — and retail spending is about two-thirds of our economy.”
“In the reconciliation, there’s one last chance,” and I’m not overly optimistic,” he added, saying that Republicans are wrongly implying that because Long island is a high tax region, the federal government is subsidizing it. “That’s the most offensive argument I’ve heard for years,” he said. “Don’t give us the false argument the rest of the country is subsidizing us.”
He said the average Long Island resident pays $7,000 in state income tax and $11,000 in property taxes. Unless deductions are restored, they will be on the hook for federal taxes on those amounts, he said.
Mr. Bellone said elected officials recognize that New York has high taxes, and he said there have been good faith efforts to reduce that burden on its citizens and pointed to increased efficiencies at the county level as an example of those efforts.
Mr. Thiele said the tax measure could have long-term effects on local governments, including school districts. “In Suffolk County, not one school budget was voted down last year,” he said. That could change, as home values decline and tax rates go up, he said. “There will also be impacts felt at town and village halls.”
Mr. Bellone said he feared Republicans will use the rising deficits the tax cut is expected to generate by attacking major entitlement programs. “If this is used as a pretense to cut Social Security and Medicare that would be a disgrace,” he said.
But Mr. Zeldin said such concerns are simply posturing by Democrats. “The only place I’ve heard that talk is from colleagues on the other side of the aisle who oppose the bill,” he said. “I have not heard even a whisper of that.”
Although House Speaker Paul Ryan, who recently reneged on an offer to help Mr. Zeldin with a fundraiser because of his opposition to the tax bill, recently fretted publicly about growing deficits, Mr. Zeldin said that was nothing new.
“Right now, as we are having this discussion, the national debt is over $20 trillion,” he said. “We have a debt issue in this country, regardless. This is a conversation that should have been had in the last two administrations.”