April 23, 2018
What do you call a policy fix that makes it easier to fund social programs and public services for all New Yorkers, saves the state of New York $7 billion annually, and is as easy to implement as unemployment insurance or workers’ compensation? It’s called the employer-side payroll tax, championed by CEPR’s senior economist, Dean Baker. We refer to it as the #TaxLawHack.
New York just adopted a voluntary version of the employer-side payroll tax. It’s New York’s smart tool to sidestep the recent federal tax law, which penalizes liberal-leaning states in an attempt to force cuts to quality state-level social services. But, like all change, this new law is being met with some hesitancy, skepticism and criticism.
It’s up to New York’s fearless early adopters to help keep the state’s public services funded. If you want to show the world how to fight back against GOP tax penalties, then tell your employer: “I want my #TaxLawHack!”
If your employer says it’s unproven, newfangled, or they don’t understand how to implement the employer-side payroll tax, you say:
This is not a weird trick. Employers already implement other employer-side payroll taxes to pay for workers’ compensation, unemployment insurance, Social Security, and Medicare.
If your co-worker claims it’s a pay cut, you say:
Look closely. The amount of the worker’s so-called pay cut is the same amount that was already being deducted in state taxes, only now workers DO NOT PAY STATE TAX. There’s no difference in the amount of take-home pay. However, workers get two bonuses with the #TaxLawHack: they owe less in federal taxes and they receive a tax savings even if they do NOT itemize.
If your employer says it’s too complicated, you say:
Compared to what?
Workers do absolutely nothing to get their tax savings. The employer has to do a one-time adjustment of withholdings, similar to the one-time adjustment of withholdings that all employers made when the federal tax code changed last year.
Compare the employer-side payroll tax to the popular Flexible Savings Accounts (FSA), which allows workers to set aside tax-free money from their paycheck for medical or childcare expenses. Workers can only use the savings on specified expenses and they are required to submit claims to the FSA management company. Any savings not used by the end of the year is lost.
Change is hard, but not impossible. New York’s #TaxLawHack is leading the way for other states that will be penalized by the tax law. Embrace the change.