New York Legislature Cuts Taxes in $140 Billion Budget
Late Monday night, lawmakers in Albany passed a $140 billion budget that included some noteworthy tax reform and relief. The budget unquestionably takes small steps to address New York's extremely uncompetitive business tax climate (50th in nation according to the Tax Foundation) though it does little to curb the state government's growth.
First, the death tax. As we have written, New York has one of the most onerous death taxes in the nation. Simply put, it's a bad idea to die in New York if you've amassed any sort of wealth. The Governor sought to raise the state asset exemption to the federal level and cut the tax from 16% to 10%. The legislature passed the first part, rejected the second. As Forbes's Ashlea Ebeling points out, there are problems with how the law is written but it's better than the status quo.
Second, the state will send 2.8 million taxpayers about $1.5 billion in rebates equal to local property tax increases over the next two years if localities agree to a 2 percent property tax cap. While this isn't a tax cut, it does incentivize localities to curb and prioritize spending. Essentially the state will pay homeowners if local governments behave. At present rates, property owners are still subject to the 4th highest property tax collections in the nation.
Not to ignore New York City renters, there are also about $85 million in available tax credits available based on the percentage of someone's income spent on rent.
Next, the corporate tax rate will decrease from 7.1 percent to 6.5 percent, the lowest since 1968, and the manufacturer's income tax will go from 5.9 percent to 0. Republicans succeeded in ensuring that this tax cut applied statewide, instead of only parts of the state, as the Governor originally proposed.
The utility tax surcharge is also phased out over three years, saving businesses and home rate payers about $600 million. This was a "temporary" tax signed into law in 2009 by Senate Democrats and Governor Patterson and Republicans rejected Governor Cuomo's attempts to extend the tax in his budget last year.
Bill de Blasio got some of what he wanted too. While he couldn't convince legislators to let him raise the income tax in New York City, the budget includes $340 million for the expansion of pre-k programs, $300 million of which will go to the Big Apple. Charter school funding was also increased, up to $500 per pupil in the third year and making them eligible for pre-k funding.
When you're ranked 50th in the nation for a business tax climate, there's only one direction you can go. And while this budget isn't a "grand slam" as Governor Andrew Cuomo called it, it certainly is more than a preservation of the status quo. There is some property tax relief, a reduction in the corporate income tax rate, utility bill relief, death tax reform, and a recognition that charter schools work. Republicans certainly succeeded in steering the budget in the right direction but there is still a lot of work to be done before New York can truly claim that it's "Open for Business."