Why to accept this unpopular offer

Back in April, New York Governor Andrew Cuomo developed an initiative designed to protect the financial interests of workers who could be hurt by the federal government imposing limits on the amount of local tax deduction.

However, by the beginning of December, only 220 companies participated in the program or less than 0.1% of the total number registered in the state. “This is a completely insignificant figure,” said Ken Pokalsky, vice president of the Business Council of New York State, representing major employers. “And in this case, there is no doubt that the conditions of the program need to be revised in order to increase its popularity.”
The leaders of business organizations in New York City, Buffalo, Rochester, Syracuse, Albany, Long Island, and Westchester County admitted that they had not heard of more or less significant companies that would participate in the program. At the same time, meetings on the essence of the initiative were held, but in the end, it was criticized for many reasons.
Nevertheless, Morris Peters, a spokesman for the budget department of the governor’s administration, considers it a positive fact that at least hundreds or even thousands of employees of the above-mentioned 220 companies were able to protect their financial interests. “This indicates that at least some business representatives regard tax innovations as a threat,” he added.
The reason for the development of the program was that now the income subject to federal tax can be reduced by no more than 10 thousand dollars at the expense of the amount of paid local taxes. According to estimates by Cuomo, as a result, 1.7 million residents of the state will additionally pay $ 14.3 billion to the central government, as a result of which New York’s competitiveness will suffer. However, it is worth noting that the governor did not take into account that the reform also provides for the provision of additional benefits, and as follows from several studies, the rates will be reduced for most citizens.
But one cannot but admit that the establishment of the limit will hit the population of the southern part of the state hardest, including the districts of Westchester, Nassau, and Suffolk, where, according to Bottom Data Solutions, in 2016 the average size of property taxes alone exceeded for single-family owners 10 thousand dollars.
In this regard, Cuomo proposed that employers from next year reduce their staff salaries in excess of $ 40,000 by 1.5% (with an increase of this indicator to 5% in 2021), in order to reduce the income subject to federal taxation. At the same time, workers will receive a tax credit for the appropriate amount, that is, in fact, their earnings will not be reduced, but they will be able to save on deductions to the central government.
One can argue whether such a trick complies with the law. However, the majority of companies, having studied the conditions of the program, found it simply unprofitable. In particular, many of them entered into collective labor agreements with employees prohibiting a reduction in wages directly, without any reservations. In addition, the amount of additional payments often depends on its size. And in general, it is difficult to convince any worker that he should agree to a lower salary in exchange for a promise to provide compensation in the form of a tax credit.
In the end, as Joshua Gevolb, a partner at the law firm Harter, Secrest and Emery from Rochester, noted, most employers found the program too confusing. Still, he did not rule out that it could be beneficial for small businesses, where there are relatively few employees with high salaries, for example, doctors or lawyers. To all the rest, Governor Cuomo, for all his good intentions, made an offer that could well be refused.