Yes, there has been much confusion regarding the congressional tax bill that has just passed. I even have a few clients that are still in denial that this is happening.
“It’s not gonna pass Anthony. There are too many congressional disagreements,” says one of my clients (we will call them “Mark”).
“‘But Mark,’ I said, ‘I think it’s clear that tax rates will be adjusted and your tax life has to adjust with it. Or you won’t like your tax bite or refund next year.'”
“Thanks Anthony, but I’ll keep it the way it is.”
Now, my bigger worry is not just Mark and my clients, but all New Yorkers and New York City and State.
For example, the tax bill will gut the federal deduction for state and local taxes, which would hit homeowners in states with higher local taxes like New York. Our office has calculated, based on information shared by the government, that the average New Yorker that takes advantage of this deduction will lose at least $6,000 in deductibility.
This is just one of several dangers that Mayor Bill de Blasio has realized.
“Over time I have to imagine it’s a profound negative impact on our budget because I think the downward pressure it will put on the ability of the government to fund, you name it — mass transit, affordable housing, ultimately things like Medicare, Medicaid, Social Security; all that will be pushed down to the local level. A huge amount of new expense will be forced to the local level,” he said.
So does that, in theory, mean that New York will pick up the extra cost of things like: mass transit, affordable housing, and Medicare?
But the mayor believes we are prepared!
“We have the ultimate contingency plan, which is huge reserves,” he said, adding they’d been set aside for the threat of disasters or economic downturns, he said.
But as we now see, the City Council, the area of government that controls our money, is not thinking about this concern. They are thinking about holding their job with a new pay raise.
Today, you read about a “debate and vote” for a new Council Speaker. Today, you hear about musical chairs, with City Council committee chair jobs. Today, you hear about increasing City Council term limits. Today, you will hear about East Harlem, Central Bronx and South Brooklyn being approved for re-zoning. Yet no one is discussing the potential financial disaster ahead.
While, of course, at this time it is impossible to have a finance dollar loss or percentage of a tax hike as the tax plan is still being vetted through Congress.
However, for the last several weeks, in anticipation for this disaster, we have met with several clients to reexamine their 2016 taxes to see “what effect” the tax plan will have on them and what tax adjustments one would have to make.
While of course every situation is different, I think it is safe to say that many low and middle class income New Yorkers are going to be upset to say the least.
Our office has calculated that with the suggested tax cuts, off setted by the cumulated losses of tax deductions and credits will show a tax increase on many New Yorkers, around the 15 to 20 percent range.
20 percent of that $30,000 job? $6,000!
20 percent of that $50,000 job? $10,000!
Now, isn’t this something you should be talking to your City Council elected official who just got elected or re-elected and is too busy discussing about increasing term limits instead of making sure we have those reserves to protect your services and maybe, maybe, find ways to reduce or eliminate the adjusted loss that you will have in your paycheck next year?
But wait, let’s not blame it all on the city!
Have you sat down with tax representative to discuss how to protect yourself?
I’m trying to help Mark, but he believes the tax bill can’t pass. Funny, I thought I heard Mark tell me the same thing two years ago when then candidate Donald Trump announced his presidency, that he can’t win!
So, if your state or city elected official are not prepared, are you? Do you believe, as the mayor says, that they have “plenty of reserves” and that he (and Governor Andrew Cuomo) has a plan to save you that money or make it up to you in real resources?
Are you really prepared? I already mentioned to Mark to not yell at me when he gets his taxes done next year and sees a huge loss on his tax refund (if he even gets one) .
Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving financial problems. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor PressMagazine, Financial