NYS Tax Commission Issues Report

Governor Andrew M. Cuomo this week accepted the final report of the Tax Relief Commission from its co-chairs, former Governor George Pataki and Chairman of the State University of New York Board of Trustees and former State Comptroller H. Carl McCall. Governor Cuomo had charged the Commission to identify way to reduce the state’s property and business taxes to provide relief to New York’s homeowners and businesses.

The key recommendations put forward by the Commission are based on the finding that the property tax remains the most burdensome tax facing individuals, families, and businesses in New York State, and a critical impediment to economic growth. New Yorkers continue to face some of the highest property tax bills in the nation, whether measured in absolute terms, or as a percentage of home value. The Commission recommends using $1 billion of the $2 billion revenue pool to further reduce the burden of the property tax on homeowners, and provide incentives for cost reduction at the local level.

The Commission recommends the creation of a program to freeze property taxes for two years. In year one of the freeze all eligible homeowners in taxing jurisdictions that adopt local budgets that remain within the property tax cap would receive a State credit equal to the growth in their property taxes. In Year 2, the freeze will continue for those homeowners living in jurisdictions that remain within the property tax cap and take measures to reduce costs, such as sharing services with other jurisdictions or consolidating.

In addition, while programs that cap and freeze real property taxes can keep the burden of real property taxes from increasing, there is a need to provide relief to taxpayers who are already over-burdened by the current level of property taxation. The Commission recommends that the State develop a program that would target real property tax relief based on an individual homeowner’s ability to pay.

Lowering Tax Rates for Businesses to Make New York Competitive

To encourage New York’s economic competitiveness, investment and further growth, the Commission recommends lower rates for businesses and a simplified tax structure. This includes the reform and simplification of the State’s primary corporate income taxes coupled with a reduction in the corporate income tax rate to 6.5 percent, the lowest corporate rate since 1968. The rate for upstate manufacturers upstate would be reduced further, to 2.5 percent, the lowest rate ever. In addition, all manufacturers will benefit from a recommendation by the Commission to reduce property taxes on manufacturers by 20 percent through a State credit program.

To further encourage business expansion, the Commission recommends that the temporary utility assessment (18-a), scheduled to be eliminated in 2018, will be eliminated in 2014 for industrial customers and all other customers will see an accelerated phase out of the surcharge. Together, these proposals will tackle the remaining barriers to investment and job growth that exist in the current tax regime.

Estate Tax Reform

The Commission recognizes the need to update the estate tax. New York remains one of only 17 states with either an estate tax or an inheritance tax, and only two states currently have a lower exemption. Because estate tax thresholds have not kept pace with the rise in home values, more and more middle-income New Yorkers find themselves subject to the tax. The Commission is therefore recommending a major reform of the estate tax, increasing the State’s threshold to $5.25 million, indexed to inflation, and lowering the tax rate. Finally, the Commission endorses the majority of the Tax Reform and Fairness Commission proposals to simplify the structure of New York’s tax system by eliminating nuisance taxes.

Heather C. Briccetti, Esq. president and CEO of The Business Council of New York State, Inc. and member of the Commission said, “The recommendations of the Tax Relief Commission contain several provisions strongly supported by The Business Council of New York State. These include a significant restructuring of the corporate franchise tax, broad-based business tax rate reductions, and expedited business relief from the “Section 18-a” assessment on energy purchases. The proposal also includes an income tax credit targeting manufacturers, based on the amount of real property taxes paid in New York state – a mechanism that focuses this credit on employers with significant in-state investments.”

Assembly Minority Leader Brian Kolb (R) said, “There has never been a lack of tax-cutting proposals. There’s been a lack of courage to address New York’s spending, which has resulted in a high-tax problem that has spiraled out of control. Recommendations are nice. Results are better. The Commission’s report is a step, but we can do much more. I look forward to addressing these recommendations and other legislative proposals to provide effective, sustainable tax relief for overburdened New Yorkers.”