Relates to tax table benefit recapture; repealer

Title of bill

An act to amend the tax law, in relation to the personal income tax table benefit recapture; to repeal subsection (d) of section 601 of such law relating to personal income tax; and providing for the repeal of certain provisions upon expiration thereof

Purpose

This legislation would raise the cap for incomes subject to the supplemental tax.

Summary of legislation

Amends section 601(d) of the Tax Law, to alter the tax benefit recapture (or supplemental tax) to raise the income levels for different filing status using a graduated scale. The levels at which each status would proportionally lose their ability to tax their incomes at lower rates is changed from between $100,000 to $150,000 for everyone, to $125,000 to $175,000 for heads of households and $150,000 to $200,000 for married-joint filers. Single individuals would use the existing schedule of $100,000 to $150,000. In addition, subsection (d-1) shall not apply to taxpayers who are small businesses as defined by the economic development law and whose gross receipts or sales from their business are greater than $10,000.

Existing law

Currently, personal income tax payers that have adjusted gross income (AGD between $100,000 and $150,000 proportionally lose the benefit of having their income below $20,000 (single), $30,000 (head of household), or $40,000 (married~joint) taxed at a lower rate. Taxpayers with an AGl of $150,000 or above, lose this benefit completely and all of their income is taxed at the highest rate.

Justification

The average income of families has increased over the last several years. More and more middle class citizens are finding themselves in the "highest" tax bracket. As a result more and more working families are subject to the supplemental tax, increasing their overall tax liability.

The tax benefit recapture (or supplemental tax) was enacted in 1991. It has never been indexed for inflation, nor does it utilize a graduated scale for different tax filing status (single, head-of-household, married-joint). Therefore, an individual with no dependents making $100,000 is currently treated the same as a family of four with two incomes making $100,000 combined. This section of the tax law has in fact operated as a marriage penalty, further inhibiting the desires of young working families desire to live and raise their families in New York.

Thus, this legislation would raise the cap on income levels triggering the supplemental tax in an effort to decrease the tax burden on joint filers and heads-of-households.

Legislative history

2007- Passed Senate; 2008 -Finance

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately and shall apply to taxable years starting on or after January 1, 2010; provided, however that section two of this act shall expire and be deem repealed January 1, 2013 and section three of this act shall take effect January 1,2013.