A little-noticed provision in President Trump’s spending bill would require New York’s top-earning firms to shell out billions of dollars in extra taxes each year – and experts say it could accelerate a business exodus that has already slammed city and state coffers, The Post has learned.
Tucked away in Trump’s 1,100-page “big, beautiful bill” for federal tax cuts is a one-sentence proposal to curtail workarounds to the SALT cap that took the form of pass-through entity taxes, known as PTET, that grants about $16 billion worth of personal income tax deductions each year to New York service businesses — among them lawyers, accountants, doctors, dentists and veterinarians.
Amending the PTET loophole looks like an attempt by GOP lawmakers to offset a proposed restoration of SALT deductions on state and local taxes — massive breaks enjoyed by New Yorkers that Trump had controversially downsized during his first presidential term, according to tax experts.
“That’s absolutely what’s going on,” said EJ McMahon, a fellow at the Manhattan Institute for Policy Research. “There’s a great tension that’s been created by this.”
The Republican spending bill, which the House Budget Committee advanced on Sunday, calls for raising the current SALT deduction cap to $30,000 from $10,000 for those making less than $431,000 annually.
The problem, however, is that by curtailing PTET, the city’s top-earning accounting, finance and law firms would effectively see their taxes jump by as much as six percentage points — even with a hike in SALT deductions, according to a former partner at a national CPA firm who requested anonymity.
Currently, a partnership or other non-incorporated business paying a 10% tax could reduce it to about 4% using PTET, the source explained.
“If a company was on the verge of moving, this could be the tipping point. This could be the final straw,” Bobbi Rebell, a personal finance expert, told The Post.
That’s because New York’s top-earning firms typically pull down far more than $431,000 annually and won’t qualify for the SALT cap, according to experts. Even if these firms did qualify, a $30,000 credit is nothing to those paying the bulk of New York’s tax revenue, McMahon said.
“It clobbers the real lucrative end and New York’s tax base is more disproportionately reliant than ever on very high-earning individuals,” McMahon told The Post.
Meanwhile, the loss of PTET is likewise poised to slam a swath of New York’s smaller mom-and-pop service businesses, which will be forced to stay and weather the storm, experts said.
“It is a little bit harder for accountants and lawyers to pick up and move to Florida than it is for Wall Street professionals to do it, since their clients are located in New York,” a former partner at a New York accounting firm told The Post.
On Tuesday, Trump urged recalcitrant GOP lawmakers to unite behind his bill, to little avail.
The White House did not immediately respond to The Post’s request for comment.
The Association of International Certified Professional Accountants has urged its members to call their Congress people and protest the end of PTET.
The excising of PTET could also potentially remove the deduction for New York City’s 4% unincorporated business tax, hitting Big Apple residents doubly hard, McMahon said.
New York City’s finance and budget agencies did not immediately respond to The Post’s requests for comment.
During his first term in 2017, Trump signed the Tax Cuts and Jobs Act, which capped SALT deductions at $10,000.
The pass-through tax was created to skirt around this cap, allowing small corporations and partnerships to substitute a personal income tax for a business tax and qualify for substantial deductions.
The IRS approved the rule in 2020 just days after Trump lost his bid for re-election to Joe Biden and it quickly spread, with at least 36 states across the country adopting their own PTET programs.
Between 2018 and 2022, more than 125,000 New York City residents decamped to Florida — taking nearly $14 billion in income with them, according to a study from the nonpartisan Citizens Budget Commission.
Nearly 160 Wall Street firms managing nearly $1 trillion in assets have moved their headquarters out of New York since the end of 2019, Bloomberg reported.
Credit: Source link
