Reduces personal income tax rates for the middle class

BILL NUMBER:S7845

Title of bill

An act to amend the tax law, in relation to reducing personal income tax rates

Purpose

This bill would make the lower tax rates put into effect in 2011 perma- nent.

Summary of provisions

Section one makes the lower tax rates put into effect in 2011 for joint filers making less than $300,000 permanent. Section two makes the lower tax rates put into effect in 2011 for heads of household filers making less than $250,000 permanent. Section three makes the lower tax rates put into effect in 2011 for single filers making less than $200,000 permanent. Section four states that is act shall take effect immediate- ly.

Existing law

The lower tax rates on middle class families put into effect in 2011 are scheduled to expire in 2015.

Justification

With the tax reforms of 2011, middle class families in New York now pay the lowest tax rates they have in nearly 60 years. Thanks to these reforms, over four million New Yorkers saw their tax rates go down and the typical middle class New York family will save between $300 and $400 per year.

Unfortunately, these tax reforms are set to expire in 2015. For many middle class families, this will result in a four to five percent tax increase. Wealthier families will see larger cuts in dollar amounts, but as a percentage of their income these cuts will be significantly less A family making one million dollars pays more than eleven times as much in personal income taxes as a family making one hundred thousand dollars, but will get less than four times the reduction in tax liability from this legislation. Making the middle class tax cuts permanent is essen- tial to preserving New York's consumer base, as middle class families tend to spend a high percentage of their income within the State. At the same time it is necessary that the higher tax rates on small businesses and job creators expire as scheduled in 2015.

Preserving the middle class tax cuts while allowing the temporary higher tax rates to expire will be a powerful one-two punch combination for the New York economy. Middle class families will continue to see reduced rates, allowing for increased consumption. At the same time, small busi- nesses will see their tax rates return to previous levels, allowing for increased investment and expansion.

Legislative history

FISCAL IMPLICATIONS: To be determined.

Local fiscal implications

EFFECTIVE DATE: This act shall take effect immediately.