If Congress fails to act on the impending fiscal cliff, New Yorkers could face more than $43 billion in tax increases and lose $609 million in federal aid in 2013, the state's comptroller, Thomas DiNapoli, said Thursday in a speech to the Business and Labor Coalition of New York.
"Many New Yorkers are still recovering from the Great Recession and struggling each day to make ends meet — and some are literally digging out from Sandy's devastation," DiNapoli said. "The fiscal cliff's massive one-two economic punch could easily push the state's economy backward."
DiNapoli also said that some of the alternative solutions to the fiscal cliff under consideration could have harmful effects on New York, including the elimination of the tax exemption for municipal bonds.
"The reduction or elimination of the municipal bond tax-exemption would result in higher borrowing costs and higher debt service costs, though some costs may be partially offset by additional revenues from taxes," DiNapoli said.
In a report on the impact of the fiscal cliff on the state, DiNapoli found that federal taxes could sharply rise on Jan. 1 for virtually all working New Yorkers. The pending 47% increase in the payroll tax rate would cost New Yorkers $7.7 billion in 2013 and immediately reduce paychecks.
The report also said that New York families would suffer tax consequences. A family with two children would lose $1,000 a year from the reduction of the child credit. A low income four-person family making $34,000 could lose an additional $1,000 in tax credits from changes in the earned income tax credit.
New York State and its local governments would also lose an estimated $5 billion in federal funding over nine years due to the automatic cuts in federal spending. The state would lose $609 million in 2013, including $210 million in education funding, $137 million for health and human services, and $128 million for housing programs.