Dec. 11 (Bloomberg) -- New York’s corporate tax rate would be cut to its lowest level since 1968 as part of reductions in property and business levies called for by a commission appointed by New York Governor Andrew Cuomo.
The panel, led by former Republican Governor George Pataki and former Democratic Comptroller Carl McCall, recommended $2 billion in total tax cuts over three years. The state’s corporate tax rate would fall to 6.5 percent from 7.1 percent, and for manufacturers upstate the figure would be 2.5 percent -- the lowest ever, according to the commission.
The panel’s report also proposed a two-year program of property-tax rebates in municipalities that stay within a 2 percent cap on annual increases. The tax cap adopted by the state in 2011 doesn’t apply to New York City, so it would be exempted from the rebates.
Under another recommendation, the threshold on estate taxes would be raised to $5.25 million from $1 million, and the rate lowered to 10 percent from 16 percent.
“This is good news,” Cuomo said at a press briefing in Old Westbury on Long Island, where the report was unveiled. “It’s good news that the state is in the position to contemplate tax cuts.”
Cuomo, a 56-year-old Democrat up for re-election next year, wants to make New York’s tax structure more business-friendly. He also has targeted property taxes, which are particularly heavy in suburban areas around New York City, including Westchester County where they are among the highest in the U.S.
“The No. 1 tax in this state is the property tax,” Cuomo told reporters in a conference call last month. “It’s the most oppressive tax that New Yorkers pay. So that’s why we’re going to focus on that.”
A “circuit breaker” recommendation from the commission would give homeowners a credit when taxes exceed a certain percentage of personal income. Cuomo has said he’ll probably support such a provision in the state budget he’ll introduce in January.
Cuomo two years ago pushed through the legislature the property-tax cap for local government and income-tax cuts for the middle class. He raised rates for wealthier residents.
The governor appointed the seven-member New York State Tax Relief Commission in October to find ways to cut property taxes using a potential surplus he says will be in the budget he’ll propose in January.
The commission’s report won qualified backing from the head of a business advocacy group, while a labor leader blasted it.
The Partnership for New York City praised the recommendations “to reduce some aspects of the tax burden,” including “raising the threshold for estate taxes,” said Kathryn Wylde, the group’s president, in a statement.
Wylde also said “it should be noted that New York City is the primary source of surplus state revenues -- largely generated by the income tax on high-earners (the so-called ‘millionaires’ tax’) -- but New York City residents do not directly benefit” from the proposal to use $1 billion of the surplus for property tax relief for suburban and upstate New Yorkers.
She urged the state’s political leaders “to ensure that the city secures a fair share of the state revenues we generate for important priorities like public education.”
Mario Cilento, the state’s AFL-CIO president, said the commission’s report “appears to be a missed opportunity.”
“It’s out-of-touch recommendations would throw hundreds of millions of dollars in revenue out the window to fund corporate tax breaks and lessen the tax burden of millionaires, seemingly without any consideration for the potential impact on jobs and services,” Cilento said in a statement.
New York ranked at the bottom among states in terms of tax climate in 2010, according to a report by the Tax Foundation, a nonprofit research group in Washington. It had the worst rating for business taxes headed into 2014, based on a comparison of corporate levies and those on property, individual income, retail sales and unemployment insurance costs.
Another commission appointed last year and led by McCall and investment banker Peter Solomon said on Nov. 14 said that the state should end a sales-tax exemption for shoes and clothes that cost less than $110. The move would raise $800 million annually that could then be used as direct tax relief to low-and middle-income families and property owners.
As many as 21 states already have some form of so-called “circuit breaker” programs similar to the one recommended by Cuomo’s commission, according to Tax Credits for Working Families, a website that tracks programs in the states.
Another recommendation by the commission is to accelerate the phase-out of the temporary utility surcharge known as 18-a by ending it next year. It is set to expire in 2018.
To contact the editor responsible for this story: Stephen Merelman at email@example.com