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more tax reduction

New York needs
more tax reduction

And there are still more tax cuts coming–another $1.5 billion by the fiscal year starting in 2000.
Those tax reductions mean nearly one in every six tax dollars is being returned to families, individuals and businesses in New York. No other state comes close to that impressive record.
Unfortunately, no other state needs to cut taxes nearly as much as New York.
Our business taxes, in particular, are high. And that’s one reason our economy still lags behind the rest of the country.
In 1997, statewide private-sector employment growth was about 62 percent of the national average. That’s a big improvement over recent history. From 1992 to 1994, for example, we added jobs at less than 20 percent of the national rate. Our progress means tens of thousands of jobs. But saying we’re doing better doesn’t mean we’re doing as well as we can.
Nationwide, economists say employment will rise by 2.7 million in 1998. Our share of that would be approximately 170,000–good, new jobs for all of New York. But to attract these jobs, we must attract the businesses that provide them. To do that, New York must be more competitive.
The state can afford to cut taxes more this year. The Executive Budget projects that tax revenues will increase by $2.3 billion, or 6.3 percent (nearly triple projected inflation) this year. State government doesn’t need all that new revenue. Our people and our private-sector economy can use it wisely.
The best way to improve New York’s competitiveness is to cut business-tax rates across the board. Senate Majority Leader Joseph Bruno, R-Brunswick, has proposed reducing our general corporate tax rate and Subchapter S tax rate from 9 percent to 6.85 percent. Thus, business taxpayers would be taxed at the same rate as individuals–a fair and sensible policy.
Our investment tax credit is one of the best incentives for major capital investments in the country. Unfortunately, it is sharply limited by the alternative minimum tax. The AMT requires a company to pay at least 3.5 percent of New York taxable income to Albany, no matter how much the employer has invested or how many jobs it has created here.
Manufacturers are asking state leaders to reduce the AMT significantly to boost the financial incentive for major new investments. Bruno and his conference have included in their package of business-tax cuts a reduction in the AMT from 3.5 percent to 2.5 percent–which is exactly the kind of progress we need.
Gov. George Pataki and the Legislature last year enacted a one-percentage-point reduction in the gross receipts tax on our utility bills, which will be phased in starting this fall. That’s a good start on reducing energy costs, but we need to do much more. Last year’s GRT reduction should be accelerated, and a further GRT reduction enacted this year.
Like our manufacturing sector, the securities industry brings huge amounts of wealth into New York. Extending the investment tax credit from its existing base in manufacturing to another of the state’s core industries would give brokerages and other firms a major incentive to locate new computers and telecommunications equipment in New York. Where the hardware goes, the jobs usually follow.
Other targeted tax cuts could help create jobs in industries from research-and-development to trucking.
New York is creating jobs at the best rate in years. Tens of thousands of families and individuals are better off as a result.
We have a rare opportunity to take the next step: to make our business environment still more competitive, so we can match and surpass the rest of the nation. If we can do that, thousands of additional high-quality jobs await.
Let’s go get ’em.
(Daniel B. Walsh is president of the Business Council of New York State Inc.)


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