The effective state and local tax rate on businesses in New York is among
the highest in the country, a study by the Council on State Taxation finds.
State and local business taxes in New York totaled an estimated $42 billion
in 2004, according to the study. That represented 5.7 percent of New York's
gross state product, while business taxes nationwide averaged 4.7 percent
of gross product.
The study included estimates of property taxes, sales and excise taxes,
gross receipt taxes, corporate income taxes, and payroll taxes. New York
taxes were in the top five for allof those measures, ranking second-highest
in property taxes, fifth-highest in gross receipt taxes, second-highest
in corporate income taxes, and third-highest in payroll taxes.
Another recent study, by the Federal Reserve Bank of Boston, confirms
that New York's taxes are by far the highest in the country.
The Federal Reserve study rejected the idea that New York's “social
needs” explain that heavy burden. The "tax effort" required
of New York's workers and businesses is 43 percent higher than the national
average, according to the Federal Reserve study. That level is far above
any other state; even the state with the second-highest tax effort, Connecticut,
was only 19 percent above average, the Fed's study showed.
Tax effort measures how much state and local governments in each state
collect in taxes, compared to the revenue-generating capacity of the state's
economy. Federal Reserve economists also calculated "fiscal need"
in each state. That index includes measures such as the poverty rate,
the proportion of residents who are school-aged, and number of vehicle-miles
traveled.
New York State's fiscal need was only 1 percent above the national average,
the Federal Reserve study found. After adjusting for need, state and local
government spending in New York is at least 35 percent above average in
such major areas as education, public welfare, health/hospitals, highways,
and police/corrections, the Federal Reserve study concluded.