Governor Pataki announced a broad plan to strengthen the Upstate New York economy, including proposals to adopt a "single sales factor" that would apply corporate income tax to manufacturers only on their sales in the state, and to eliminate the alternative minimum tax.

The Business Council has identified both of those reforms as key steps toward a more competitive climate for manufacturing, the most important sector of the economy in many Upstate regions.

"With more private sector jobs than at any time in its history, the Upstate economy is better than it was, but not nearly as good as it's going to be if we continue to make the changes that are encouraging investment, sparking growth, and creating jobs," Governor Pataki said.

"For more than a generation, hundreds of companies were forced out of our state by high taxes, irrational regulations and a hostile business climate. The exodus of these companies devastated the Upstate communities they once supported," he added. "We've spent the last six years cutting taxes and regulations to bring them back. But there's more to do."

The Governor's single-sales proposal would effectively cut state taxes for any manufacturer whose proportion of total sales in New York is less than the company's proportion of payroll and capital plant in the state. Currently, companies apportion income to New York for tax purposes based on their sales, payroll and property - meaning that employers pay higher taxes when they invest in new jobs in the state. The new proposal would eliminate payroll and property from the formula.

The Business Council's Board of Directors has identified adoption of the single-sales factor as the top tax priority for 2001.

The Governor's proposal would save taxpayers some $34 million a year when fully effective in five years.

The Governor also announced he will propose a five-year phase-out of the alternative minimum tax (AMT), which requires companies to pay at least 2.5 percent of their New York income in taxes regardless of how much they have invested in the state. New York's investment tax credit creates an incentive for manufacturers and securities firms to make capital investments in the state, but the AMT limits the usefulness of the credit. Reducing and eliminating it are longstanding priorities of The Business Council.

Governor Pataki's proposals also include:

Expanding 22 existing Empire Zones to stimulate economic development in Upstate communities. Businesses that create new jobs in the zones receive incentives that make doing business there virtually tax-free, including a credit for property taxes paid. Under the proposal, certain existing zones, in areas that have suffered economically, would be expanded from two to four square miles.

Increasing funding of worker retraining for manufacturers.

Encouraging redevelopment of brownfields through tax credits. Empire Zone property tax benefits would extend to Upstate brownfields of 10 or more acres, and those of 100 acres or larger would receive enhanced benefits if they are not already in an Empire Zone. In addition, businesses and individuals statewide would be eligible for a new tax credit equal to a portion of costs incurred in cleaning up a brownfield site.

Business Council Daniel B. Walsh said the Governor's new proposals to cut taxes on manufacturing employers "will result in the ultimate economic dividend: new job growth."

"Eliminating the alternative minimum tax and enacting a single sales factor for manufacturers will reward companies, rather than punishing them with higher taxes, when they invest in New York," he said.

Walsh pointed out that new policies Governor Pataki and the Legislature have implemented in recent years have already paid off in major increases in manufacturing investment in the state.

"The nearly $5.9 billion that manufacturers invested in the Empire State in 1998 represented an increase of 18 percent from two years earlier, significantly higher than the national average of 11 percent," Walsh said. "New capital investment is a crucial indicator of corporate executives' confidence, and business confidence in New York has soared."