For Release — Dec. 7, 2010
FPI examination of tax expenditures is wrong on diagnosis and prescription according to The Business Council
ALBANY— “The labor-backed Fiscal Policy Institute's (FPI) examination of “tax expenditures” seems to conclude that New York would be better off with even higher taxes on its employers. Nothing could be further from the truth,” said Kenneth Adams, president and CEO of The Business Council of New York State. “In New York state low taxes are not the problem.”
The Business Council pointed out that state and local taxes on business amount to $56 billion, second only to California and more than Texas by $3 billion and 64 percent above fourth place Florida, according to the Conference of State Taxation/Ernst & Young 2009 State Tax Climate Report.Total state and local business taxes in New York are 5.5 percent of gross state product, almost 20 percent above the national average, according the same report.
The non-partisan Tax Foundation ranks New York's business tax climate the worst in the nation.
The Business Council also noted that the biggest share of the “tax expenditure” included in the FPI report is the exclusion from 9-A taxable income for income from subsidiary capital (i.e., interest, dividends and capital gains) valued at about $2.5 billion. Virtually all states with a corporate income tax have some form of interest or dividend exclusion, although New York's is probably the broadest, and dates back to the 1945 state tax reform which recognized the state's role as a corporate headquarters state.
The two other largest “expenditures” relate to Empire Zones and Brownfields tax credits – the former was legislatively limited twice and then done away with, and the second restricted twice by the legislature. Both incentive programs have been the basis for major capital investments and job creation in New York State, and their reduction will harm the state's ability to attract new investment and jobs.
The current budget also suspended already earned tax credits for three years breaking a promise to businesses that had already invested in New York.
“New York's job growth has lagged behind the nation for most of the past two decades,' added Adams, “due to the state's non-competitive economic climate, including high business and other taxes. Increasing taxes at a time we are trying to grow out of the recession makes no sense.”