Cuomo: state should eliminate upstate corporate income tax, freeze prop taxes
The New York State Capitol. Photo: Trevor Alford
Update, 3:00 There have been several responses to the state’s tax relief plan — here’s one of the more interesting, from the Alliance for Quality Education’s Billy Easton:
Governor Cuomo’s tax plan front-loads tax breaks for banks and wealthy estate owners with money that our classrooms sorely need. The average millionaire estate owner would receive $128,000 in taxpayer subsidies. Instead, it would make more sense to spend this money on libraries and teachers in our kids’ schools.
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New York Gov. Andrew Cuomo announced today (here’s video of the announcement if you’re into that sort of thing) his tax-related hopes and dreams for the future today (it’s officially called a tax relief proposal), and while the changes he proposed are far from a foregone conclusion, some of them are of particular interest to those in northern New York.
Probably the most interesting, because it’s upstate-focused, is this one (text from a press release this afternoon):
Eliminate Tax Rate on Upstate Manufacturers
To encourage the growth of manufacturing Upstate, Governor Cuomo recommends that the State eliminate the corporate income tax rate for Upstate manufacturers. This proposal would provide an additional $25 million in tax relief for Upstate businesses and complement the proposal to reduce property taxes on manufacturers.
Hm, interesting! The full (long) text of that release is below, but here are some other highlights from the announcement:
A tax credit for manufacturers (referenced above) to offset property taxes;
A two-year freeze on property taxes, including residential. It’s a somewhat complicated formula but this could prove very interesting in the coming months given how hard-hit some local governments and schools have been by the current freeze (on the other hand, property taxes in NYS are very high…and so we go…);
A renters’ tax credit for low and moderate-income renters;
And much, much more! Here’s the full text of the release.
Governor Andrew M. Cuomo today announced details of a more than $2 billion tax relief proposal designed to increase economic opportunity and attract and grow businesses across the State. Thanks to responsible fiscal management in state government, New York has gone from a $10 billion deficit to an expected $2 billion surplus. Today’s proposals are made possible by this success, and are the next major step in New York’s continued transformation to a more affordable state businesses and families.
“Over the past three years, we have made unprecedented progress toward curbing the rise of taxes and government spending in New York, transforming a state budget with a $10 billion deficit to a $2 billion surplus,” Governor Cuomo said. “These proposals build on our previous successes including enacting the state’s first property tax cap and achieving the lowest middle class income tax rate in 60 years, increasing economic opportunity by further reducing taxes and attracting businesses to the state. The proposals introduced today will keep New York moving in the right direction, creating jobs, growing the economy and providing much-needed relief for struggling families. I thank both the Tax Reform and Fairness Commission and the Tax Relief Commission for their recommendations, and look forward to working with the legislature to enact these proposals.”
Click here for video of the Governor’s announcement of the proposal earlier today.
Based on current projections, if spending growth is held to two percent annually the State will see a surplus of approximately $2 billion by FY 2016-17. Given this projected surplus, Governor Cuomo proposes a more than $2 billion package of tax relief measures to help New York residents and businesses. The proposals have been informed by the hard work of the New York State Tax Reform and Fairness Commission and the New York State Tax Relief Commission. Any costs of the package over $2 billion will be offset by proposals to streamline tax collection, which will increase revenue through improved audits.
Governor Cuomo’s proposal includes the following measures:
2-Year Freeze on Property Taxes
By almost any measure, New York’s real property taxes are the highest in the nation with an average residential bill of $5,040. In addition, three of the top four highest county median tax bills in the country are in New York. And New York is one of only 10 states where a resident can live in three general purpose local governments at the same time. There is no reason for New York to have nearly 10,500 separate forms of local governments; many of which provide overlapping or duplicative services.
Governor Cuomo’s proposal will freeze property taxes for two years, subject to two important conditions. In year one, the State will only provide tax rebates to homeowners who live in a jurisdiction that stays within the 2% property tax cap. In year two, the State will only provide tax rebates to homeowners who live in a locality that stays within the cap and also agrees to implement a shared services or administrative consolidation plan. The freeze will not apply to New York City, which does not have a property tax cap. Once fully implemented, this tax relief proposal will provide nearly $1 billion in relief with an average benefit of approximately $350 for nearly 2.8 million homeowners.
Property Tax “Circuit Breaker”
Under the property tax circuit breaker proposal, 1.9 million low- and middle-income taxpayers pay an effective real property tax rate relative to income that exceeds their income tax rate. To help these individuals and families, Governor Cuomo proposes that the State provide tax relief based on a taxpayer’s ability to pay. Households earning up to $200,000 would be eligible and the benefit would be administered as a refundable tax credit against the personal income tax with an average benefit of approximately $500. While the credit would be available statewide, in areas outside of New York City, only residents of jurisdictions that adhere to the property tax cap would qualify. This credit would be worth $1 billion in tax relief when fully phased in.
Renters’ Tax Credit
There are 3.3 million households across the state that rent their homes. Over 829,000 low-income renter households pay more than 50% of their monthly cash income on housing costs and thousands of moderate-income renters face similar burdens. To provide tax relief for renters, Governor Cuomo proposes providing tax relief for renters with incomes below $100,000 by offering a refundable personal income tax credit that increases with family size. This proposal would provide over $400 million in tax relief for 2.6 million renters.
Estate Tax Reforms
New York is one of only 15 states that impose an estate tax, and the current estate tax level is badly in need of reform. While the federal government exempts the first $5.25 million of an individual’s estate, New York only exempts estates valued below $1 million. To end this unnecessary incentive for elderly New Yorkers to leave the state, Governor Cuomo proposes increasing the New York estate tax threshold to $5.25 million and lowering the top rate to 10 percent over four years. Beginning in 2019, the State estate tax exemption would equal the Federal exemption, which is indexed to inflation. This change would exempt nearly 90 percent of all estates from the tax, restore fairness and eliminate the incentive for older middle-class and wealthy New Yorkers to leave the State.
Cut Business Taxes and Treat Businesses More Fairly
New York’s corporate franchise tax is largely outdated and its complexity results in lengthy and complex audit processes that take businesses years to resolve. To streamline the tax structure and provide relief for businesses, Governor Cuomo recommends that the State merge the bank tax into the corporate franchise tax and lowering the rate to 6.5 percent – the lowest rate since 1968. These changes will modernize the corporate tax structure to reflect a 21st Century financial services sector, simplify compliance and eliminate disincentives for financial firms to invest and grow jobs in New York. When fully implemented, the proposal will provide $346 million annually in tax relief to New York businesses.
Real Property Tax Credit for Manufacturers
Lowering the cost of doing business for manufacturing firms will make New York a more attractive place for firms to locate their operations and will create jobs Upstate and in the New York City region. To grow existing manufacturers and attract new manufacturing businesses, Governor Cuomo proposes that the State create a refundable credit against corporate and personal income taxes that would be equal to 20 percent of a firm’s annual real property taxes. This credit would provide $136 million in tax relief to the manufacturing sector.
Eliminate Tax Rate on Upstate Manufacturers
To encourage the growth of manufacturing Upstate, Governor Cuomo recommends that the State eliminate the corporate income tax rate for Upstate manufacturers. This proposal would provide an additional $25 million in tax relief for Upstate businesses and complement the proposal to reduce property taxes on manufacturers.
Accelerate phase-out of the 18-A Surcharge
To provide tax relief to both families and companies in energy intensive industries, Governor Cuomo recommends that the State immediately eliminate the two percent Temporary Utility Assessment (18-A) levied on commercial electric, gas, water and steam utility bills for industrial customers and accelerate the phase-out for remaining customers. New Yorkers already pay some of the highest energy bills in the nation yet this surcharge increases the already high burden on struggling families and companies. The phase-out will save businesses and residents $600 million over the next three years.
Tax Simplification
Governor Cuomo is proposing a series of actions to simplify the tax code to eliminate nuisance provisions, many of which make it difficult to do business in New York. These measures include the repeal of: the personal income tax minimum tax add-on; the boxing and wrestling exhibitions tax; the tax on agricultural cooperatives; and the stock transfer tax, which is actually a zero-rate tax, meaning it collects no revenue. In addition, the income threshold for filing of a personal income tax return will be increased from $4,000 to the same level as the taxpayer’s standard deduction, eliminating the need for 270,000 taxpayers to file a return. Tax simplification efforts also include modifying signature requirements on e-Filed returns prepared by tax professionals, and aligning mobility and personal income tax filings for the self-employed.
Building on past successes
New York has long had a reputation as a high-tax, anti-business state. Since taking office, Governor Cuomo has taken steps to tackle this issue including: limits on the growth of state spending, the enactment of a property tax cap, the lowest middle class tax rate in 60 years, elimination of the MTA payroll tax on more than 700,000 small business and the self-employed, creation of a new family child tax credit, tax cuts for small businesses and manufacturers, reforms to unemployment insurance and workers compensation insurance, and new START-UP NY tax free zones. The combination of effective budget management and adherence to the 2 percent spending limit benchmark is expected to further improve the State’s fiscal position.
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Anyone else get a kick out of seeing “Tax Simplification” toward the end of a list of complicated and technical tax credit proposals?
If it sounds to good to be true, it probably is.
Wouldn’t it be much simpler and fairer to eliminate all tax breaks and lower the tax rates equally for all?
I’m reminded of a scene in a Richard Gere movie “First Knight” where he played Sir Lancelot and was dogging all of these moving contraptions trying to whack him off a platform. This is what our tax codes at the state and federal level have become.
The bottom line is as always. A certain amount of money must be raised through taxes to provide the services governments provide. The only realistic way to lower taxes is to decrease the services.
To me, the bottom line of these proposals is to make the governor and the state legislators appear to be the heroes for the people by making local governments and schools the enemy of the people.
Another shell-game scam by Emperor Andrew.
Freezing property taxes sounds awesome… except property taxes are levied by localities, not the state. The typical county budget as 80-90% of its revenues devoted to state and federal MANDATES. That’s the reason property (and school) taxes are so high.
If Cuomo were serious about reigning in property taxes, he’d ban any new mandates and limit the growth (to, oh I don’t know, maybe 2% a year?) of existing mandates.
To show zero interest in that just proves exactly what Pete Klein so wisely said above: “the bottom line of these proposals is to make the governor and the state legislators appear to be the heroes for the people by making local governments and schools the enemy of the people.”
As others above so astutely pointed out, the entire proposal simply moves the burden of taxation from one place to another. It’s all too easy for politicians at the state level to mask their feeble attempts at addressing the continuous and ever growing unfunded state mandates by creating these ponzi schemes and rolling them out to the public every year or so instead of actually making tough decisions to address the real problem.
Much like his recent and frankly all too feeble attempt at marijuana reform, the Governor ignores the real problem and goes for a safer play of his political capital with the hopes that some among us will believe his shell games actually address the underlying problems in New York. I suppose it’s good theater for the media and those he hopes to impress as he looks toward his run for the White House. Meanwhile local govt’s and school districts whither on the vine and the failed and incredibly costly war on marijuana continues unabated, medical marijuana or not….
This is the same game Pataki played. And while from a PR perspective it was successful, for the average citizen it was a disaster. Cutting state taxes for corporations and the wealthy had the effect of transferring costs to local governments and school districts which required property tax increases that hit the middle class hardest.
Now Cuomo wants to do the same thing. But with local tax caps in place the result will be fewer services and more teacher layoffs. Like Pataki, Cuomo wants to burnish his fiscally conservative credentials on the backs of the middle class. His proposal is totally unrealistic and irresponsible.
And why do they all want to do this? Because if schools are supported through the income tax, it has the effect of moving money from wealthy areas of the state to poorer areas– exactly what is needed, but not real popular with the banksters and hedge fund managers, who fund politicians campaigns with a tiny fraction of the money such moves save them.
Indeed, Walker…Spot on. It’s the same explanation as to why the state aid formula for education funding has not been reformed.
Very well written, Nora – this is the best explanation I’ve read of how the property tax freeze and circuit breaker proposals would work.
This is a bully’s approach. Cuomo is trying to make it politically impossible for town, village and county officials to do anything other than what he wants them to do. If he wants to lessen the burden of property taxes, he should use the state surplus for mandate relief, and have the state assume responsibility for 100% of the state’s Medicaid costs.