APRIL 1998

Legislature sets tax-cut schedule; recesses until Tuesday

Corporate tax rate to drop from 9.0 to 7.5%, starting in 1999

New York State's corporate franchise tax rate — the main business tax, paid by more than 200,000 companies — will drop from 9.0 to 8.5 percent for taxable years starting on or after July 1, 1999, under a schedule announced by legislative leaders Thursday.

As Senate Majority Leader Joseph L. Bruno and Speaker Sheldon Silver had announced a week earlier, the corporate tax rate will decline to 7.5 percent under legislation that will be enacted as part of this year's state budget. The rate will fall to 8.0 in 2000 and 7.5 percent in 2001, under the schedule made public Thursday.

The 16.7 percent reduction in the corporate tax rate is the centerpiece of a major package of business tax cuts included in the new budget, to be phased in over several years. The entire package will reduce taxes by $743 million, including overall business-tax reductions of more than $450 million.

The rate reduction, one of The Business Council's top priorities for 1998, will bring New York's corporate income tax rate from eighth highest among the 50 states to 25th highest, tied with North Carolina. Competitor states such as New Jersey, Ohio and Indiana will have business tax rates higher than New York's when the changes are fully effective.

Timetables for other major business-tax reductions to which the Senate and Assembly had previously agreed were also announced Thursday:

In addition to business-tax reductions, the budget includes enhancements to the state's reduction in sales tax on clothing.

At the initiative of Senator Bruno and Governor Pataki, the budget also includes a $45 million increase in the Jobs Now fund, which provides incentives for major new business facilities opening in the state; and a new, $10 million Strategic Training Alliance created at the urging of Speaker Silver and Assemblyman Robin Schimminger. The latter fund will be used for skills-training programs overseen by alliances of employers.

The Senate and Assembly recessed for the weekend, with plans to resume their session next Tuesday, April 14.

Building on the results of a conference-committee process in which substantial portions of the budget were debated in the open, the two houses have reached agreement on the main elements of a new state budget—including the tax cut package, which will save business and citizens some $743 million when fully effective.

The two houses have already passed relatively less complicated, less controversial portions of the budget—such as the health and public-protection portions of the budget, and debt-service legislation. Earlier this week, they had indicated they hoped to complete passage of all the budget bills by Thursday or Friday.

But late Thursday afternoon, the leaders said more time would be needed. There were indications that the technical process of assembling bill language was taking longer than anticipated. And there were reports that there were still some significant disagreements between legislators and Governor George Pataki—who has threatened to veto spending increases above the budget he submitted.

April 9, 1998