Featured Debate: New York State Tax Reform
Can New York State overcome its high-tax reputation?
The New York State Tax Reform and Fairness Commission was created in 2011as part of a legislative agreement to reduce personal income tax rates. It is tasked with addressing possible long-term changes to the State tax system and to help economic growth in the State. All thirteen members are required to have expertise in the tax field. They will not be compensated. The co-chairs are H. Carl McCall, the former New York State Comptroller and now chair of the State University Board of Trustees, and Peter J. Solomon of the investment advisory firm bearing his name. The press release about the appointments stated:
“Last year, New York State government successfully passed comprehensive tax reform that put in place a progressive tax and established the lowest tax rate for the middle class in 58 years,” said Governor Cuomo. “This Commission will now undertake a broader review of the state’s complex tax code to find ways to make it simpler, and more fair, and help reduce the tax burden faced by New Yorkers and businesses. I thank all the members for their dedication to public service and look forward to working with them as we continue to make New York a national leader in reform.”
The New York State Tax Reform and Fairness Commission will conduct a comprehensive and objective review of the State’s taxation policy, including corporate, sales and personal income taxation and make revenue-neutral policy recommendations to improve the current tax system. In its review, the Commission will consider ways to eliminate tax loopholes, promote administrative efficiency and enhance tax collection and enforcement.
Reform cannot come too soon given that New York’s 2013 Business Tax Climate was ranked 50th by the Tax Foundation in its report titled: 2013 State Business Tax Climate Index. A USA today assessment found New York State residents paid the highest taxes – 12.8% of income.
The Guide to New York State Taxes outlines 14 major taxes that New York State levies. The Personal Income Tax, accounts for 60% of State revenues, and applies to sole proprietors, partnership members (which includes LLC’s who do not opt for corporate status), and S corporation owners/shareholders in addition to individuals. Property tax burden ranks among the nation’s highest according to a 50 State Property Tax Comparison Study completed by the Lincoln Institute of Land Policy. Business taxes collected from general corporations, banking corporations, insurance companies, utilities and petroleum companies’ account for another major source of state revenue.
With the State’s emphasis on marketing itself Open for Business and promoting the commercialization of the technology developed in New York’s array of stellar research universities and Centers of Excellence, one has to wonder if the lure of excellent research centers can lure entrepreneurs and investors past the reputation for too-high taxes.
New York State offers a large number of tax credits and incentives including those directly targeted to High-Tech Companies by NYSTAR. The Milken Institute’s State Technology and Science Index (2011) finds New York to be above average in the categories of: Human Capital Investment , Research and Development Inputs, Risk Capital and Entrepreneurial Infrastructure, Technology and Science Work Force, and Technology Concentration and Dynamism.
Another way to look at the taxes in New York is to recognize that the services and infrastructure financed by higher taxes provides other benefits. James Parrott, chief economist and deputy director of the Fiscal Policy Institute, stated that "New York State did much better than the rest of the nation last year in terms of three key indicators of economic performance: gross domestic product, income growth and job growth,"