This legislation is intended to put New York State in a better position to recover quickly from the national economic slowdown, and to secure a greater share of new investments and new jobs that will be created as the nation comes out of its brief recession.
This legislation would enhance New York's post-recession competitive strengths by enacting key tax reforms that will encourage companies to choose New York for the investments. S.6605/A.10712 would:
- allow businesses to elect a "single sales factor" allocation for assessing corporate franchise tax liability, thereby providing a significant tax incentive for maintaining and adding employment and capital investments in New York State;
- phase out the alternative minimum tax, in order to increase the value of existing investment incentives for businesses making capital investments in New York;
- make permanent the investment tax credit for the securities industry, a measure that will help promote redevelopment of lower Manhattan as a world center for the financial services industry;
- authorize an expansion of certified capital companies, or CAPCO's, which will make additional, private sector capital available for new investments; and
- clarify the tax treatment of charges for telecommunications services aggregated or bundled with nontaxable telecommunications services; and
- create parity in the application of existing statutory provisions of section 183 dividends taxation to all telecommunications carriers.
These reforms are targeted both at the manufacturing sector that is key to Upstate New York's economy and at the financial services and telecommunications industries so vital to recovery in Lower Manhattan.
In considering this agenda, time is of the essence. In the midst of a recession, business investment activity slows down. But business planning does not. Businesses in and out of state are analyzing what investment and growth opportunities they will seize once the economy turns around. As the recovery develops, business investment will grow again - and the initial investments made in the immediate post-recession period, in turn, will often tend to dictate where follow-up investments are made as the economy continues to expand. This means that now is the time to position New York State as the most attractive possible place for those post-recession investments.
Now is also a good time to make these policy changes, from the point of view of fiscal prudence. Investment incentives will have little cost to the state budget right now, when investment activity is reduced. Their cost will be felt only once the economy turns around-and at that point the costs will be offset by growth in the personal income tax and other revenue sources benefiting from the economic stimulation our policies will produce.
New York's experience over the past eight years clearly shows the benefits of public policies that are receptive to business investment and growth. Beginning with the Bruno-Morelle business tax reforms enacted in 1994, and continuing with the dramatic business and personal tax reductions, regulatory changes and other reforms adopted by Governor Pataki and the Legislature since then, New York has made enormous improvements in its business climate. Between December of 1994 through the start of the current recession in March of 2001, New York gained 842,600 jobs.
Recent experience also illustrates that these policy changes will help New York through during economic downturns as well. New York's experience in the current recession has been utterly different from the early 1990's. Instead of losing jobs before the nation did, we were still gaining jobs in the early months of the recession. And our losses just matched the national average until September, when New York suffered as the epicenter of the terrorist attacks.
All told we have lost 126,700 jobs, or 1.5%, since the recession began, and analysts attribute half or more of those losses to the impact of 9/11, not to the recession itself-proof positive that New York's improvements in its business climate in recent years have greatly improved our ability to withstand a national economic downturn.
So we have a record of success on which to build. And we must continue to build on this record of success if we wish to ensure a fast recovery and solid long-term growth for our state.
New York now has the opportunity to lay the groundwork for a fast economic recovery in 2002. For these reasons, The Business Council urges that S.6605/A.10712 be approved as part of the FY 2003 budget.