Last fall, Gov. Andrew Cuomo pledged to make tax cuts the central focus of his 2014 State of the State address and executive budget. So does the budget approved just before the April 1 deadline reflect that?
Overall, the answer is yes. The budget worked out by the governor and legislative leaders contains a number of important reductions and reforms that will provide relief to businesses and individual taxpayers.
The corporate franchise tax, for example, was reduced from 7.1 percent to 6.5 percent—a rate not seen since 1968. It also was modernized and simplified.
For manufacturers, the budget contains a 20 percent real property tax credit for companies that own or lease property. Manufacturers also will see an income tax reduction to zero from 5.9 percent.
Further, the budget includes an accelerated phase-out of the 18-a temporary assessment. This is a key step in a state where energy bills for residents and businesses are among the highest in the nation.
New York’s estate tax, meanwhile, will have a phased-in increase in the exemption to bring it in line with the higher federal level.
And Mr. Cuomo won passage for his centerpiece proposal: a new property tax credit. The plan calls for delivering this credit to New Yorkers whose local governments stay within the property tax cap. It will be extended for a second year in localities that comply with the tax cap and enact a plan to save 1 percent of their tax levy annually, over three years, bringing an estimated $1.5 billion in property tax relief.
The devil, as always, is in the details. The property tax credit in particular drew some criticism, and it will be important to examine how the plan actually plays out. The estate tax reforms also bear scrutiny, especially the impact on estates that are only slightly larger than the exemption.
The Tax Foundation’s 2014 State Business Tax Climate Index ranked New York at the bottom for overall tax competitiveness. To significantly improve its ranking, New York likely would need to reduce rates broadly; the new budget, however, does nothing to bring down the state’s high personal income tax rates.
But hopefully the steps just taken will help make the state a better place to start and grow a business.
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