Relates to creating the middle class circuit breaker tax credit, and to the tax rate of certain taxpayers earning over one million dollars

Summary of provisions

Provides for a "circuit breaker" for taxpayers earning up to $250,000 per year who pay a disproportionate share of their income in property taxes. New Yorkers would receive a credit on their 2012 income taxes depending on their income level and the percentage of property taxes they pay as a portion of their income.

The tax credit would consist of 70% of any amount paid in property taxes beyond the percentages and income levels are noted below:

HOUSEHOLD GROSS INCOME MAXIMUM REAL PROPERTY TAX

$100,000 or Less 6% of Household Gross Income

$100,000 - $150,000 6% of $100,000 Plus 7% of up to the Next $50,000

$150,000 - $250,000 6% of $100,000 Plus 7% of $50,000 Plus 8.5% of Household Gross Income Above $150,000.

Provides for the revenue to pay for the circuit breaker portion of this legislation, by maintaining the current income tax rate for those earning $1 million of more, for the calendar years 2012 and 2013.

Provides that the revenue derived from the difference between the 2008 income tax rate for those earning over $1 million, and the 2012/2013 rate, would be deposited into two dedicated funds. The first would be used to pay for the circuit breaker tax credit; and the second would be for education.

Effects of present law which this bill would alter

The legislation maintains the 2011 income tax rate for those earning $1 million or more through 2013 and provides a dedicated source of revenue to fund property tax relief.

The legislation would also establish two dedicated funds under the State Finance Law (for property tax relief and school aid).

Justification

Depending on which study one were to believe, New Yorkers pay the first or second highest tax burden of any State in the nation. The Public Policy Institute of New York State found New Yorkers paid $2.3 billion more in property taxes in 2010, than in 2009.

A report from State Comptroller Thomas DiNapoli, issued in March, 2011, indicates that suburban counties in New York, have the highest foreclosure rates in the State. Property tax relief is important for New York's middle class in every part of the State. In areas of high unemployment, the issue is an even greater concern. Property taxes are too high, and are not rationally related to income. A family's property tax bill can easily be 25% of their mortgage payment, often times a much higher percentage. In these recessionary times, the government must make choices of tax fairness in order to keep middle class New Yorkers in the State and financially viable as long-term residents of New York.

In the property tax system, there is no "check and balance" system to account for job losses or other downtowns in personal income. As a result, during even a short term financial crisis, struggling middle class families may be forced to sell their lifetime's biggest investment - their home. The decision this legislation proposes to make, would assist millions of middle class families, with long term property tax relief. The middle class tax relief would be funded initially, while the economy is recovering, by continuing the 2011 income tax rates, solely for persons who earn more than $1 million, for two years, while the economy is struggling to recover.

Legislative history

New legislation.

Fiscal implications

The fiscal implications of the circuit breaker legislation are estimated not to exceed $2.3 billion. The revenue derived by the State by maintaining the current income tax rate, on those earning more than $1 million, would equal an estimated $3.362 billion.

Effective date

Immediately.