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April 15, 2014

New York's corporate tax reform improves state business tax climate

ALBANY—The recently finalized FY 2014-2015 New York state budget includes major reforms to the state's corporate income tax system and estate tax that will broaden the state's tax bases, lower tax rates and reduce the complexity of New York's flawed corporate tax code, according to a new report released by the Tax Foundation. The Business Council aggressively advocated for these tax reforms to be included in the final state budget. The Tax Foundation noted that if these reforms had been implemented prior to its evaluation of state tax laws in mid-2013, that New York's corporate tax system would have ranked 4th best nationwide, behind only three states with no corporate income tax, instead of 25th.

“The Business Council helped shape, and strongly supported this reform package, knowing it would make New York's business tax climate more competitive,” said Ken Pokalsky, vice president of government affairs for The Business Council of New York State. It is gratifying to see the state's actions gaining national attention, as one of the most significant tax reform packages adopted by any state over the last year.”

The Tax Foundation report summarizes the elements of the lengthy bill, and its key findings include:

In the 2014 State Business Tax Climate Index, which evaluated state tax laws as of July 1, 2013, New York's corporate tax system ranked 25th best out of the fifty states, and the overall tax structure ranked 50th, or last. If the changes enacted by the bill were in full effect for the most recent version of the Index, New York's corporate tax system would have instead ranked 4th best of the fifty states, behind only three states with no corporate income tax.

The state's overall rank would have improved two spots to 48th, beating New Jersey and California. New York is not a low-tax state, and its economic success is because of strengths that overcome a challenging tax environment, with recent tax commission reports recommending many of the changes incorporated in the bill.

“New York is not a low-tax state, and its economic success is because of strengths that overcome a challenging tax environment. High taxes need not also be complex or poorly structured taxes, however, and removing these obstacles will encourage job creation and economic activity,” said Joseph Henchman, Tax Foundation Vice President of State Projects. “New York's 2014 corporate tax reform is an impressive step toward tackling this problem by broadening bases, lowering rates, reducing burdens, and eliminating needless complexity.”

Read the full Tax Foundation analysis, New York Corporate Tax Overhaul Broadens Bases, Lowers Rates, and Reduces Complexity, on the Tax Foundation's website.