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Stuck in place

The 2016 State Business Tax Climate Index released last week by the Tax Foundation gives favorable note to the fact New York last year enacted “substantial corporate tax reform” that as of Jan. 1 will reduce the state’s corporate income tax rate to 6.5 percent from 7.1 percent.

Yet among the 50 states, New York ranks 49th in terms of tax competitiveness. As it did in the 2015 report—and the year before that.

How can this be? After all, the changes enacted in 2014 not only cut New York’s corporate tax to its lowest level in decades, they also slashed the income tax for manufacturers from 5.9 percent to zero and simplified the tax system.

The problem is, the Tax Foundation index analyzes more than 100 tax variables in five different categories—corporate, individual income, sales, property and unemployment insurance taxes—and overall, New York’s tax climate remains among the least inviting to businesses.

Indeed, had all of New York’s 2014 tax law changes taken effect immediately, the state would have improved in that year’s report only to 48th place.

In the 2016 report, New York’s corporate tax ranking is 12th, but its individual income tax is 49th and its property tax ranks 47th. By contrast, No. 1 Wyoming is first in two of the five categories and ranks no worse than 36th in any of them.

Another problem for New York: It is not the only state taking steps to improve its tax competitiveness. Others are doing as much or more, in the Tax Foundation’s view.

This is the 12th edition of the foundation’s report, and in the past some have criticized its methodology, saying it is weighted more to the individual income tax than the corporate tax. But the foundation also does a separate analysis of marginal income tax rates on sole proprietorships and partnerships, and in the most recent edition New York’s burden was third heaviest.

Is the Tax Foundation’s research the last word on tax competitiveness? No. It is a useful reminder, however, that New York still has much work to do.

11/27/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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