January 11, 2006
Governor Pataki announces $1.1 billion business tax-cut plan
Governor Pataki Wednesday proposed a sweeping, $1.1 billion business tax-cut plan and a workers' comp reform proposal, both of which will be part of the 2006-07 Executive Budget that he will release Jan. 17.
“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.”
The Business Council had strong praise for the proposals.
"The Governor's proposal today is big news and welcome news," Business Council President Daniel B. Walsh said in a statement. "When businesses invest and make a profit in New York, they create jobs. Cutting tax rates and eliminating barriers to capital investment, as Governor Pataki has proposed, represent a powerful combination that will improve our competitive standing dramatically."
"New York has the nation's heaviest overall tax burden and second-highest workers' comp costs on a costs-per-case basis, and these unacceptably high job-creation costs keep our job-growth down."
"The Governor today is telling all New Yorkers that these realities are unacceptable and state government must address them. And he has outlined an aggressive plan which, if adopted, will benefit New Yorkers for many years to come."
The Governor’s plan would:
- Eliminate the Alternative Minimum Tax (AMT).
“This measure would eliminate the AMT and capital base taxes,
which primarily hurts manufacturers and stymies new manufacturing
investments by limiting the amount of tax credits that a company
can claim on their tax returns,” a press release from the
Governor’s office said.
- Reduce the business income tax rate by 10 percent by
cutting the corporate franchise tax on net income for companies
that pay the tax from 7.5 to 6.75 percent. The Governor’s
office said the move would save businesses $110 million annually
when fully effective in 2009.
- Encourage new capital investments in New York by letting
businesses immediately "expense" any new capital investments
they make in New York, such as new plants, facilities and equipment.
The measure would allow businesses to count the full
investment as a cost of doing business instead of over the course
of many years, saving businesses $560 million annually by 2008.
- Increase the sales tax vendor credit by 43 percent from
3.5 percent of collections to 5 percent. This would save
businesses $69 million annually by 2008, the Governor's release
- Eliminate the tax on S-corporations. The Governor’s office said the reduction for the more than 150,000 Subchapter S corporations, mainly small and closely held businesses, would save $40 million annually when fully effective in 2006.
The Governor’s office also announced that the Executive Budget would include a “comprehensive plan” to reform workers’ compensation.
“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,” the release said.
The budget will also include legislation that would “accelerate” the designation of nine new Empire Zones in the handful of counties that do not currently have one as well as increase the state’s Excelsior Linked Deposit Program by $60 million. The program allows financial institutions in the state to make low-interest loans to small businesses.
The business-tax proposals follow Governor Pataki's call for elimination of the state's estate tax. That reform would help many family-owned businesses in the state.
Many of the proposals included in the Governor's package were recommended by a commission on tax reform and simplification created last year by the Governor and chaired by economist Lawrence Kudlow. Members of that commission include Robert Ward, director of research for The Business Council and the Public Policy Institute.