New York residents would suffer more than $43 billion in tax hikes in 2013 if Congress fails to resolve the so-called fiscal cliff negotiations, according to New York State Comptroller Thomas DiNapoli.
The federal spending cuts and tax increases, known as the fiscal cliff, are set to go into effect on January 1 unless lawmakers reach a compromise. On Wednesday, Republican leaders in the U.S. House of Representatives said talks with President Barack Obama were deadlocked.
"There is real danger ahead for New York’s economy if America goes over the fiscal cliff," DiNapoli said in a prepared statement. He is scheduled to present a new report on the effects of the fiscal cliff on Thursday morning at a forum with business and labor leaders.
Taxes would rise sharply on January 1 for virtually all 8.9 million working New Yorkers, DiNapoli said in the report. A pending 47 percent increase in the payroll tax rate would cost New Yorkers $7.7 billion. An extra 3.4 million people in the state would have to pay the federal alternative minimum tax in addition to the 500,000 who currently pay it.
From Buffalo to New York City and towns in between, the state and its local governments together would also lose $609 million in federal aid in 2013, including $210 million in education funding, according to Federal Funds Information for the States. Total lost federal aid over nine years could be about $5 billion, DiNapoli said, citing calculations from the New York State Division of the Budget.
Federal lawmakers have also proposed limiting the tax exemption on municipal bonds as a way to raise revenue, but that would bump up costs for the state and other borrowers, DiNapoli said.
"Any change in the tax-exempt status of municipal bonds could force the state, municipalities, school districts, and public authorities to make a choice between passing on higher costs to taxpayers, or reducing capital investments for essential infrastructure," he said.
(Reporting By Hilary Russ)