trumps tax plan

Alabama vs New York Under the New Tax Code

A tale of two states with two very different outcomes.

After reading a CNN story where New York Governor Andrew Cuomo declared, “the GOP tax bill will pillage blue states“, I felt compelled to share some facts about our tax system. This coming tax season will be my 32nd. I’ve been studying and working with our tax code for 32 years.

The anonymous examples I’m about to share involve real-life taxpayers who had $1,900,000 of income in 2016. I have to use  high-income earners because the SALT (State And Local Tax) deduction won’t affect the average taxpayer and certainly won’t affect lower income people. A simple fact that the honorable New York Governor fails to acknowledge.

Alabama Client (Under Old Tax Code)

In 2016, the Alabama client with $1.9 million of income paid $561,276 federal income tax and $44,219 to the State of Alabama.

New York Client (Under Old Tax Code)

In 2016, the New York client with the same $1.9 million of income paid $503,278 federal income tax, $127,516 New York State Tax and $71,928 New York City Resident Tax.

What are the important observations here? First, the New York resident paid ($57,998) less Federal Income Tax than the Alabama taxpayer! Why? Because he got a federal tax deduction for his SALT of $199,444. This has been this way for years.

So over the course of 17 years, the Alabama guy has paid $1,000,000 more in federal income taxes to the federal government than the New York guy!

Has anyone ever seen the Governor of Alabama on TV raising mortal heck about this?

 

Alabama Client (Under New Tax Code)

In 2018, we expect the Alabama client to pay $525,276 in federal income tax and $46,019 to the State of Alabama. Note the inverse relationship between state and federal taxes. As the Alabama resident’s federal tax bill goes down, his state tax bill goes up. Why? Because the State of Alabama allows a deduction for federal taxes paid (New York does not).

New York Client (Under New Tax Code)

In 2018, we expect the New York client to pay $537,372 federal income tax, $127,516 New York State Tax and $71,928 New York City Resident Tax.

My Message to New York Governor Andrew Cuomo

Stop your belly-aching. It will take 83 YEARS for your New York Resident just to catch up the $1 million that the Alabama taxpayer has already paid-in over and above the New York resident.

Gregory J. Cook, EA, CPA

Gregory J. Cook, EA, CPA

News from Cook & Co. Tax Advisors at 124 South Main Street in Arab, Alabama. We are currently hiring. If you or someone you know is interested, email greg@bara.net with resume.
Gregory J. Cook, EA, CPA

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Comments (9)

  1. Cook & Co. Tax Advisors

    Most didn’t understand all the fuss about SALT, because they didn’t know what the acronym stood for. Even more are shocked to learn that an Alabama taxpayer with the same income as a New York resident has been paying more federal income tax. It’s true!

  2. Melissa Martin

    The people that live in NY and other high state tax areas needs to go to their State and local elected officials and complain and quit gripping about not getting to count it off in their Federal tax.

  3. Gus Kopanas

    Yes because if u look the guy in Bama pays 44000 in state tax but in ny the guy pays 127000 in state n 76000 in city tax so the fed money they get to pack there pockets

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