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The single-sales factor works. Here's proof

February 12, 2001

In its report criticizing single-sales factor taxation for New York State, the Fiscal Policy Institute makes specific reference to experiences in Iowa, Missouri, Massachusetts and Illinois. FPI claims that experience shows that "states that have adopted SSFF so far do not have a great deal to show for it."

Actually, the manufacturing sector in each of those states has outperformed New York's since 1980, the earliest year FPI uses for comparison. (See table below.)

Even more importantly, Massachusetts and Illinois have seen stronger performance in manufacturing employment, relative to the rest of the country, since starting to phase in single-sales in 1995 and 1998, respectively, as shown below. That's the basic premise of single-sales taxation for New York.

The Public Policy Institute's recent report on single-sales taxation examined numerous changes in state apportionment formulas over 20 years and found that increasing the weight on the sales factor improves job growth relative to the rest of the country. The data below provides some specific examples.

Manufacturing employment (thousands)

New York

Illinois

Iowa

Massachusetts

Missouri

United States

1980

1426.8

1162.3

239.6

671.2

431.6

           20,190

1990

1097.9

969.3

235

508.7

436.2

           18,780

1995

937

966.3

250.7

451

423.2

           18,523

1996

923.2

974.2

251.9

446.7

419.4

           18,560

1998

903

969.2

262.8

443.2

417.7

           18,715

2000

876.6

946.5

262

433.1

400.7

           18,317

20-year % chg.

-38.6%

-18.6%

9.3%

-35.5%

-7.2%

-9.3%

  20-year net chg.

-550.2

-215.8

22.4

-238.1

-30.9

-1873

10-year % chg.

-20.2%

-2.4%

11.5%

-14.9%

-8.1%

-2.5%

  10-year net chg.

-221.3

-22.8

27

-75.6

-35.5

-463

5-year % chg.

-6.4%

-2.0%

4.5%

-4.0%

-5.3%

-1.1%

  5-year net chg.

-60.4

-19.8

11.3

-17.9

-22.5

-206

2-year % chg.

-2.9%

-2.3%

-0.3%

-2.3%

-4.1%

-2.1%

  2-year net chg.

-26.4

-22.7

-0.8

-10.1

-17

-398

December data (2000 are preliminary)



New York compared to Iowa and Missouri

Manufacturing jobs New York lost, 1980-2000 .................

If the change in New York manufacturing employment, 1980-2000, had.

    .matched the gains in Iowa, New York would have gained ...........

      132,692

jobs

    .matched the rate of loss in Missouri, New York would have retained an extra ..

      448,050

jobs


Massachusetts and Illinois compared to the national average, before and after SSF

Mass.

U.S.

Illinois

U.S.

Chg., 1980-95

-32.8%

-8.3%

Chg., 1980-98

-16.6%

-7.3%

Chg., 1990-95

-11.3%

-1.4%

Chg., 1996-98

-0.5%

4.3%

Chg., 1995-00

-4.0%

-1.1%

Chg., 1998-00

-2.3%

-2.1%


Relative job loss, Massachusetts compared to U.S., 1990-95: 11.3 to 1.4, or 8.1 to 1

Relative job loss, Massachusetts compared to U.S., 1995-00: 4.0 to 1.1, or 3.6 to 1

Manufacturing jobs Massachusetts would have lost, 1995-00, if it had maintained

       previous rate of growth compared to national economy:

       40,184

Actual manufacturing jobs Massachusetts lost, 1995-00:

       17,900

  Massachusetts' job "gain" after SSF, compared to previous:

       22,284


Relative job gain factor, Illinois compared to U.S., 1996-98: 0.8 to 4.3, or .19 to 1

Relative job loss factor, Illinois compared to U.S., 1998-00: -2.3 to -2.1, or 1.1 to 1

If Illinois had continued performing as badly, relative to the nation, as it did in 1996-98, it would have lost thousands of additional manufacturing jobs from 1998 to 2000.