January 5, 2005
recommends tax cuts, reduced Medicaid spending
State of the State address also announces major new private investments
Saying tax cuts have helped New York’s economy in the past and can help again, Governor George Pataki Wednesday proposed a series of tax cuts, including the accelerated phase-out of tax hikes imposed by the state Legislature in 2003.
In his annual State of the State address Wednesday, the Governor said another key tax-cut proposal, the so-called single-sales factor reform, would be part of a new initiative designed to help struggling Upstate communities. And he proposed reducing the state’s highest-in-the-nation Medicaid spending.
"The best way to foster a job-friendly climate is by relieving the tax burden on all our fellow New Yorkers," the Governor said. "More progress must be made to reduce the tax burden on all New Yorkers. We know tax cuts work. We’ve proven beyond all doubt how cutting taxes creates jobs and prosperity for our fellow New Yorkers. We’ve done it before, now let’s do it again.”
Business Council President Daniel B. Walsh said, "We are heartened to see the Governor's energetic commitment to putting New York back on the path to prosperity. Tax cuts and spending restraint spurred job growth earlier in his administation, and they can give New Yorkers the same benefits again."
Many of the Governor’s tax-cut proposals are part of a proposed iniative called Operation SPUR. SPUR stands for the Strategic Partnership for Upstate Revitalization. These tax-cut proposals include:
- Enacting the single-sales factor tax reform for manufacturers.
This reform would base corporate taxes for manufacturers
on just one factor, in-state sales. Corporate taxes are
now based on three factors: in-state jobs, payroll, and
property. Because state taxes now increase as in-state jobs
and sites increase, companies are effectively encouraged
to put jobs and plants elsewhere.
The single-sales factor reform would base taxes on just one factor, in-state sales, removing this disincentive to investment in New York. A 2001 study by the Public Policy Institute, The Business Council’s research affiliate, concluded that fully enacted single-sales factor reform would ultimately lead to 133,000 new jobs and a net increase in state revenues.
The Business Council recently asked the Governor to advance such a proposal for manufacturers as well as other industries, to stimulate new investment and job creation.
- Creating new job tax credits in new agribusiness zones.
- Creating tax credits for high-tech businesses
- Expanding the state’s earned income tax credit to included lower-income single fathers.
- Expanding the state’s STAR property-tax relief program. The Governor’s speech did not elaborate.
- Simplifying the tax code. The Governor gave no details,
but said he will ask former Reagan
administration economic adviser and television commentator Lawrence Kudlow to lead a review of the existing tax code and recommend reforms.
- Easing the worsening burden of property taxes in the state by working with county executives to cap Medicaid costs and give local property taxpayers the relief they deserve.
“Let this be the year we get it done,” the Governor said. “Let this be the year we stand up for taxpayers once again.”
The Governor also said he would proposal Medicaid reforms
that will cut costs and also protect
county property taxpayers.
In his speech, the Governor also announced a number of major private-sector investments.
- IBM—along with other global companies such as Sony,
Toshiba and Samsung—will invest $1.9 billion to build
a “next generation” computer chip plant in the
Hudson Valley. IBM and other companies will also invest
$450 million to expand the Sematech research center in Albany,
whilie ASML, a leading manufacturer of equipment for computer
chips, will invest $325 million to create a research center
at the University at Albany, the Governor said.
The investments could bring an estimated 1,000 jobs to Upstate, according to news reports.
- Additional plant expansions are planned in Grand Island, Erie County, in Fulton, Oswego County, and Seneca Falls, Seneca County.
In his speech, the Governor also:
- Said he would propose a new statewide school aid formula
along with new accountability
measures for schools. He noted that in the last 10 years, New York has increased overall school funding by 55 percent, which he said is more than twice the rate of inflation
“New York City alone now gets $2.3 billion a year more than it did a decade ago, and New Yorkers now invest over $12,000 per student - more than any state in the nation,” the Governor said.
- Proposed eliminating or consolidating hundreds of commissions, task forces, boards and authorities.
- Urged lawmakers to negotiate a budget reform bill that “opens up the process, empowers individual legislators and ensures balanced and on-time budgets.” In discussing budget reform, the Governor was interrupted with the must sustained and enthusiastic applause of the afternoon.
- Recommended a ban on backdoor borrowing.