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New York still has second-worst business tax climate, per Tax Foundation

When it comes to taxes, New York remains one of the worst states for businesses, according to the Tax Foundation.

The organization’s 2023 Business Tax Climate Index ranks New York second-worst in the country, ahead of only New Jersey. The Empire State has been ranked 49th for five consecutive years, and has never been better than 48th since the Tax Foundation launched in the Index in 2014.

“For overburdened employers across New York, the Tax Foundation’s new 2023 State Business Tax Climate Index is anything but surprising,” Upstate United said in a prepared statement. “New York’s business tax climate — the second worse in the nation for the fifth year in a row — makes it very difficult for small businesses to grow and succeed.”

The Tax Foundation uses five categories to determine an overall ranking, blending corporate tax rate, individual income tax rate, sales tax rate, property tax rate and unemployment insurance tax rate to create a final score. The Tax Foundation is a Washington, D.C.,-based thinktank that studies federal and state tax rates.

New York’s corporate tax rate ranks 24th of the 50 states, mid-pack, but that’s the lowest ranking in the 10 years of the Index.

The state’s individual tax rate is the worst in the country, and that’s very important because a significant number of businesses — sole proprietorships, partnerships and S corporations — report income through individual tax codes, the Tax Foundation said.

New York ranked 43rd in sales tax rate, 49th in property tax and 40th in unemployment tax. New Jersey ranks last in every category.

“This index measures how well states structure their tax systems, enabling policymakers, business leaders and taxpayers to gauge how their states’ tax systems compare,” said Robert Duffy, president and CEO of the Greater Rochester Chamber of Commerce. “One of our goals should be to move up in these rankings, and not remain in the bottom three every year.

“Residents and businesses often vote with their feet, which New York has seen this occur far too often. Reducing taxes will result in both business and population growth. This should be the goal of our state leaders.”

Upstate United, a non-partisan, pro-taxpayer advocacy coalition is comprised of business and trade organizations, certainly agrees and is urging lawmakers to implement change.

“We need our leaders in Albany to step up and deliver broad-based tax relief in 2023,” the organization said. “That relief is essential to restoring our economy, reviving our communities and reclaiming the title of the Empire State.”

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Upstate United suggests using federal funds to provide unemployment insurance relief to businesses

Upstate United, a nonpartisan pro-taxpayer organization, has published a fact sheet detailing what it says is a potential $9 billion tax increase for employers statewide.

Troubling Trends — New York’s $9 Billion Unemployment Insurance Crisis makes the case for the state government to use untapped federal funds to provide unemployment insurance relief to struggling businesses.

“The impending unemployment crisis will be a big problem for small businesses across the state. Hitting employers with $9 billion in UI-related costs right now would derail our economic recovery at a critical time,” said Justin Wilcox, executive director of Upstate United. “Providing UI relief with unused federal dollars will help employers keep their doors open and workers employed.”

At the height of the pandemic, nearly 2 million New Yorkers were unemployed. As a result, the state’s UI fund ran out of money and New York ultimately had to borrow $11.9 billion from the federal government to cover its UI payments, the organization noted. While some of that money has been repaid, New York still owes Washington $9 billion. The state’s UI fund — which currently is insolvent — must be replenished.

Upstate United points to a recent analysis from the Tax Foundation that found that New York has more than $11 billion in federal aid available through the American Rescue Plan Act. That analysis also found that, unlike the majority of states nationwide, New York has not spent any federal aid to address its UI shortfall.

“Over the last 20 months, elected officials encouraged their constituents to support local businesses. Now, we’re asking those same officials to give a lifeline to employers before they go under,” Wilcox said.

In a report issued last month, New York State Comptroller Thomas DiNapoli voiced concerns about the state’s UI issues. According to the report, from the fourth quarter of 2019 until the second quarter of 2020, regular UI benefits paid increased from $530 million to $6.5 billion — an increase of 1,124 percent. Total benefit payments, including federally funded enhanced benefit programs, were nearly $100 billion in New York from March 1, 2020, through Aug. 6, 2021.

“The surge in UI claims rapidly depleted the balance of the New York State Unemployment Insurance Trust Fund, requiring the State to borrow from the federal government to pay claims, with $9 billion in outstanding UI loans as of Sept. 2, 2021,” DiNapoli wrote in the report. “Over the coming years, the obligation to repay these federal advances and rebuild the Trust Fund balance to appropriate levels will present a daunting challenge that could potentially impede the State’s overall economic recovery and prevent New York businesses from growing to the full extent of their capacity.”

DiNapoli called for a collaborative approach to address the crisis, stating “Working together, New York State, participating employers and the federal government can develop solutions that restore the Trust Fund while allowing the ongoing economic recovery to continue.”

Upstate United’s fact sheet noted that unless New York takes swift action, the state’s borrowing will result in many employers paying a 254 percent UI tax increase in 2025.

“There is a solution to this crisis. New York can pay down its debt and fully fund its UI trust fund using unspent federal dollars from COVID-19 relief programs,” the group stated. “Failing to do so will stick overburdened businesses across New York with a $9 billion tax hike and stall our economic recovery.”

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Upstate United addresses New York’s taxes

Upstate United, a non-partisan, pro-taxpayer organization, is again pushing back against New York state’s tax burden.

In a fact sheet released last week ahead of the state’s budget agreement, Upstate United shows how New York compares with other states in various tax areas.

“As special interests keep calling on Albany to raise taxes, our organization is committed to fighting for much-needed tax relief. Overburdened taxpayers continue to flee New York, due in part to the state’s extraordinary tax burden,” said the organization’s Executive Director Justin Wilcox in a statement. “Returning to the days of massive tax hikes and bloated budgets isn’t progressive, it’s problematic.”

The organization noted that New York ranked 48th nationwide in the Tax Foundation’s 2021 Business Tax Climate Index, ahead of just California and New Jersey. Upstate United noted that as part of their budget proposals, the state’s Senate and Assembly proposed higher rates on certain business taxes.

Citing several reports from WalletHub, Upstate United’s fact sheet shows that New York has the highest overall tax burden and the third-highest annual state and local taxes on median household. The state ranks seven for taxpayer return on investment, which is the total taxes paid per capita versus overall government services rank, and ninth for its effective property tax rate.

“Thanks to the recent federal stimulus package and better-than-expected state tax collections, there are ample resources for this year’s budget,” Wilcox said. “Moving forward, we’ll need to grow our way out of this problem. Washington isn’t going to come to our rescue every year. The sooner we can reopen businesses, rebuild our economy and revive our communities, the better.”

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer