New York Gives Unions a Tax Break

Carve-out allows workers to deduct 100 percent of dues from income taxes

Andrew Cuomo
Andrew Cuomo / Getty Images

Union members will be able to fully deduct dues payments from their taxes thanks to a carve-out adopted by Democrats. 

Democratic Gov. Andrew Cuomo, who received $4.4 million from organized labor groups over the course of his political career, signed off on a new budget that will allow union members to write off 100 percent of their dues or agency fees from their personal income taxes. The tax break is expected to return $35 million to members in 2018 and has generated controversy in the state.

Brian Sampson, president of Associated Builders & Contractors Empire State Chapter—an industry group for non-union construction workers and businesses—said that he expects the legislation to cost workers money in the short term, while boosting union coffers. The full write-off would give unions an incentive to hike dues and fees for workers, knowing that they will eventually get the money back.

"This perpetuates the cycle of government doing the bidding of organized labor," Sampson said. "Unions will have more money to give to elected officials to get more pro-union laws passed that will put more money into union PACs to give to politicians. It's an unfortunate cycle."

Cuomo did not respond to request for comment.

The Empire Center for Public Policy, a free market think tank, called the tax break an "indirect subsidy for the state’s most politically powerful unions," pointing out that it would largely benefit six-figure earners in the public sector, as well as New York City residents. The federal government allows workers to deduct union wages as miscellaneous itemized deductions, but those are capped at 2 percent and only used by those who itemize rather than take a standard deduction.

"Most New York union workers—such as home health aides, school bus drivers, office clerks, along with public employees in upstate rural areas and small cities—won’t save anything from this new deduction," the Empire Center analysis said. "The benefits will flow almost entirely to the rarified class of union workers who make well above $100,000. These are mainly police officers, firefighters, and school teachers in Long Island and the lower Hudson Valley, along with the higher-paid New York City building trades."

New York is already the most unionized state in the country. In January the Bureau of Labor Statistics reported that 23.6 percent of the state's workforce belongs to an organized labor group, more than double the national rate of 10.7 percent. Labor watchdogs called the tax break a handout to union bosses.

Patrick Semmens, spokesman for the National Right to Work Committee, said that the deduction could swell the ranks of the state's unions.

"With hundreds of millions of dollars in union dues money going towards politics and lobbying every year, it is no surprise that union label politicians want to make it easier for union bosses to justify increasing the amount workers are forced to pay," Semmens said.

Sampson said that Cuomo has a long track record of supporting the union agenda. New York was the first state to adopt the $15 minimum wage advocated by the politically powerful Service Employees International Union. He also pledged to a national gathering of construction unions that "every project we build is going to be built with organized labor—every project." Sampson said the dues deduction will tip the scales in favor of unions to help them "gain a larger market."

"What unions want and what they need are always addressed by Cuomo. I would suspect that union dues will increase fairly steadily," Sampson said, adding that the tax break "gives unions something the rest of the taxpayers don’t have."

The deduction will go into effect during the 2018 tax season.