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Government Affairs Albany Update

January 13, 2006

Governor Pataki Unveils $1.1 Billion Job-Creating Tax Cut Package

Governor Pataki has announced that the following business tax changes designed to effect job creation will be in the FY 2007 Executive Budget to be presented next week. The Governor's press release noted that the new $1.1 Billion job-creating tax cut package builds on New York's strong record of cutting taxes, reduces the cost of doing business, and gives New York's employers even greater freedom to grow, expand, and create jobs. "We've proven over and over again that tax cuts create the financial freedom that creates new jobs and new opportunities for New Yorkers," Governor Pataki said. "Whether it's cutting taxes by billions of dollars each year, creating the Empire Zone program, or reforming Workers' Comp - we know that lowering the cost of doing business is the way to create new jobs and expand the economy."

Details of the Governor's plan include:

Elimination of the Alternative Tax Bases of Minimum Taxable Income and Business Capital: This measure would eliminate the alternative Minimum Taxable Income and Capital Base taxes, which primarily hurt manufacturers and stymie new manufacturing investments by limiting the amount of tax credits that a company can claim on their tax returns. These measures would save businesses $330 million annually when fully effective in 2008.

Reduction of the Business Income Tax Rate by 10%: This measure would cut the corporate franchise tax rate on net income for companies that pay the corporate franchise or bank tax from 7.5 percent to 6.75 percent. This measure would save businesses $110 million annually when fully effective in 2009.

Increase of the Sales and Use Tax Vendor Credit from 3.5% to 5%: This measure would increase the credit given to businesses – many small businesses - who collect the Sales and Use tax for the State and local governments. Under the proposal, the credit would increase by three-sevenths - from the current 3.5 percent of collections to 5 percent. It is expected that the monthly and quarterly credit caps will be increased. This measure would save businesses $69 million annually when fully effective in 2008.

Expensing of Capital Investments in New York: This measure would allow business to "expense" in the year of investment any new capital investment they make in New York, such as new plants, facilities, and equipment. This means that they would be allowed to count the full investment as a cost of doing business in year one, as opposed to current law which requires that they partially do this over the course of many years. This measure would save businesses $560 million annually when fully effective in 2008.

Elimination of the tax on subchapter S corporations: This measure would eliminate the corporate tax assessed on the more than 150,000 subchapter S corporations in New York – most of which are small businesses. This measure would save businesses $40 million annually when fully effective in 2006.

Acceleration of the Naming of Nine New Empire Zones: The Governor's Executive Budget will include legislation that would accelerate the current Empire Zone designation process to ensure that every county currently without an Empire Zone – which includes Delaware, Greene, Hamilton, Putnam, Rockland, Schoharie, Tompkins, Yates and Wyoming Counties – has one by the end of this year. This measure would save businesses $66 million annually.

Offer of new Low-Interest Loans for Small Businesses: The Governor's Executive Budget will increase the State's Excelsior Linked-Deposit Program by $60 million – to a total of $410 million. The program allows banks, credit unions, and the New York Business Development Corporation to make low-interest loans to small businesses who are looking to expand and create jobs.

Workers' Compensation Reform: The Governor's Executive Budget includes a comprehensive plan that would reform and improve New York's Workers' Compensation system by reducing costs for businesses while increasing benefits for injured workers. The new measures would reduce Workers' Compensation costs for businesses by more than 15 percent, while increasing benefit levels for injured workers by 25 percent. These new reforms come on top of the historic workers' compensation reforms the Governor fought to achieve in 1996 that have already reduced costs by 25 percent on average.

The Governor's release noted that "Under the Governor's leadership, New York has led the nation in cutting taxes, including 81 cuts to 19 different State taxes which has pumped more than $140 billion back into New York's economy and led to the creation of over 600,000 new jobs."

High Speed Rail Plan Announced

On Thursday, January 5, 2006, Senate Majority Leader Joseph L. Bruno released a detailed plan to improve New York's rail system by reducing travel time, improving reliability and increasing the frequency of trains across the state. The report was officially presented to the Senate Task Force on High Speed Rail after six months of research by the Task Force Working Group.

Click here to view the announcement. The full report will be available next week.