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PUBLIC TESTIMONY
Testimony by George Sweeting, Senior Fellow at the Center for New York City Affairs at The New School
5:46:51
ยท
6 min
George Sweeting from the Center for New York City Affairs at The New School testified on two tax credits in the mayor's budget: the "axe the tax" credit and the Relocation Assistance Credit for Employees (RACE). He also discussed potential impacts of federal tax proposals on NYC's budget.
- The "axe the tax" credit efficiently removes income tax liability for lower-income New Yorkers with dependents, costing $63 million in FY2026.
- The RACE credit offers $5,000 per employee relocated to NYC from outside NY State, designed as a 3-year pilot to address office vacancy issues.
- Sweeting warned of potential $2 billion annual impact on NYC's budget from proposed federal tax changes, including ending taxation on Social Security benefits, overtime pay, and tips.
George Sweeting
5:46:51
Good afternoon.
5:46:53
I'm George Sweeting.
5:46:54
I'm a senior fellow at the Center for New York City Affairs at The New School.
5:46:59
And Chair Brennan, thank you for the opportunity to testify here.
5:47:03
We will be submitting written testimony shortly.
5:47:09
I was gonna go over sort of the budget picture itself, but I think you've heard a lot of that today.
5:47:15
So I'm gonna jump to another part of our written testimony which is focusing on two tax credits that are in the mayor's budget.
5:47:26
The first is called the axe the tax, which it efficiently removes personal income tax liability from really essentially all lower income or working poor New Yorkers who have at least one dependent in the household.
5:47:50
And this accomplishes something that on and off has drawn some attention in the city that we actually tax at the lower income levels more heavily say than the federal government does.
5:48:03
And there are people in New York who have to pay New York City tax currently who don't owe anything to the federal government for example.
5:48:12
So this acts the tax is gonna I think probably be the final necessary step to really truly get all of those people that are currently still forced to pay some relatively small amount of tax off the tax rolls.
5:48:30
The cost for doing that is estimated by OMB at $63,000,000 for fiscal year twenty twenty six.
5:48:38
It grows to about 70,000,000,000 by 2028.
5:48:43
And this credit actually does its job in a sense better than two of the governor's proposals that are also labeled.
5:48:54
One is a middle class tax cut and one is giving back the what's supposedly returning the windfall that the state got due to inflation pushing up sales tax revenues.
5:49:11
Both of those are much less efficient, meaning we spend money there that winds up helping people that are not the designated beneficiaries for the program.
5:49:28
The places where they make adjustments in the tax code are probably higher than you would need to make them to accomplish the stated goal.
5:49:39
And the efficient design in acts the tax program does leave more money available to help deal with what's likely to be coming from Washington.
5:49:49
So I think it's a good compromise of solving this problem of having people on the tax rolls, know, that the federal government doesn't put them on the tax rolls.
5:50:02
And also, but doing it in a way that doesn't give money to people further up the income distribution, who by most definitions wouldn't count as lower income or working poor.
5:50:15
The other credit that is in the budget actually the second one is not in the budget, although the enabling legislation is in the governor's executive budget legislative package.
5:50:28
And that's called the relocation assistance credit employees or RACE is the term they use.
5:50:37
And this is trying to deal with the problems of vacancy in older office buildings in the city which are having a hard time attracting tenants.
5:50:50
So what the RACE credit would do is it creates a credit of $5,000 per employee that you can relocate from outside New York State into New York City.
5:51:08
It's it's set up as a pilot study for and with only three years.
5:51:15
I think this program, there are some more questions about what's going on there, but I would, you know, I think this is an opportunity to try to this is a would be a different way of of evaluating tax expenditures than what we we typically wait until after the program has been up and running.
5:51:33
With this pilot, if we if we approach it openly, you could we can let this program run for three years and see if it's accomplishing its goals.
5:51:44
And also, are the costs relatively well aligned with the benefits to the city, then you could extend it, let it go on.
5:51:55
But if it's not working, it's easier to shut a program off very early than to let it get established and a lot of people are using it.
5:52:05
The other point
Justin Brannan
5:52:06
I would I'll give you twenty seconds to
Jacques Jiha
5:52:08
wrap it up.
George Sweeting
5:52:09
Okay.
5:52:09
The other point I would just wanna make is, and I think hopefully the city is working on this, but there are real concerns coming out of Washington in terms of some of the the proposal the tax proposals that President Trump is talking about.
5:52:25
Ending the taxation of Social Security benefits, ending overtime pay, and ending tips.
5:52:33
That would flow through into the New York City budget, or at least the New York City tax system and therefore into the city budget.
5:52:40
We have a rough estimate that that might cost about $2,000,000,000 a year if the city did nothing.
5:52:47
If the federal government went ahead and implemented that and then the city did nothing, there would be about a billion dollar hit.
5:52:56
There are you know, the city could decouple from the taxes from the federal definition of income, but that that makes real complications for for city residents trying to do their taxes.
5:53:09
Or Alright.
5:53:12
You the other the other point is that it makes enforcement of the tax from the city's perspective much harder.
5:53:20
If you're if you're not gonna the federal government would would presumably stop collecting the data on tips and wages, tips and and overtime and Social Security income.
5:53:32
And therefore the city wouldn't have that available to start assembling the the tax liability for individuals.
5:53:40
So there's some real issues that
Justin Brannan
5:53:42
Thank Will you be submitting testimony?
5:53:44
Yes.
5:53:45
Okay.
5:53:45
Good.
5:53:45
Thank you, George.
George Sweeting
5:53:46
Thank you.