Reasons For Reform
Citing three years of “fiscal integrity,” Gov. Andrew Cuomo’s Tax Relief Commission believes it has found a solution for New York’s high taxes.
A report released Tuesday included several recommendations for tax relief, similar to November’s assessments performed by both state Sen. Catharine Young, R-Olean, and Cuomo’s Tax Reform and Fairness Commission, a separate committee assigned to research tax solutions.
On Tuesday, relief commission co-chairs George Pataki, former governor, and H. Carl McCall, former state comptroller, said that three years of responsible budgeting resulted in a $2 billion surplus, enabling them to identify ways to provide relief to New York homeowners and businesses.
Local officials responded with support for the commission’s findings.
“I see a lot positives coming from this,” said Sam Teresi, Jamestown mayor. “I welcome the thought process and the recommendations, and ultimately I think it will come down to these types of initiatives to help us at the local level to get to the root of the problem.”
Pataki said he and the commission focused on real property taxes and delivered a robust program to provide real relief to middle-class taxpayers and especially those on fixed incomes.
“The commission worked overtime to deliver our recommendations, and I’m proud of the package we’ve assembled,” he said.
Key recommendations put forward by the commission were based on findings that property tax is the most burdensome for individuals, families and businesses in New York state and a “critical impediment to economic growth.”
“I’ve got to give the governor and the tax commission an A for effort and a lot of credit to recognize we have one of the highest tax levels and property tax burdens in the nation,” Teresi said.
The report recommended half of the $2 billion revenue pool be used to reduce the burden of the property tax on homeowners.
Secondly, freezing property taxes for two years would provide relief to taxpayers already overburdened by the current level of property taxation, the report said.
In year one, all eligible homeowners in taxing jurisdictions which adopt local budgets that remain within the property tax cap would receive a state credit equal to the growth in their property taxes.
In year two, the freeze would continue for homeowners living in jurisdictions remaining within the property tax cap.
Chautauqua County Executive-elect Vince Horrigan said that although these initiatives are important, he wants to see mandate reform as the next step to relieving the burden of property taxes to county residents.
In order to fund state programs such as Medicaid, 90 cents of each county property tax dollar goes to Albany, Horrigan said.
“We want to provide every level of tax relief that we can and encourage New York state to do their part to reduce the unfunded mandates,” Horrigan said.
To encourage economic competitiveness, investment and further growth, the commission recommended lower rates for businesses and simplification of the tax structure. This included a reduction in the corporate income tax rate to 6.5 percent, the lowest corporate rate since 1968.
The rate for upstate manufacturers would be reduced further to 2.5 percent, the lowest rate ever.
The commission also proposed reduction of property taxes on manufacturers by 20 percent through a state credit program.
“Oftentimes, businesses and people look at New York state and say, ‘It’s too expensive to do business,'” Horrigan said. “We want to change that perspective and, of course, it starts with lowering the tax burden.”
To further encourage business expansion, the commission recommended that the temporary utility assessment (section 18-a of the public service law) scheduled to be eliminated in 2018, be eliminated in 2014 for industrial customers.
“On behalf of the statewide manufacturing community, I am very pleased with many of the proposals and recommendations put forth by Governor Cuomo’s tax commission,” said Randy Wolken, president of the Manufacturers Association of Central New York. “Serious tax reductions in areas including 18-a assessments, corporate income tax and estate tax reform are specific and productive measures that would help in restoring our state’s business climate.”
The assessment caused outrage among business owners in March when state legislators planned to extend and then phase out the term of imposing a fee on electric bills from public utilities to fund operations of energy-related agencies and authorities.
The commission’s report said all other customers – outside of the industrial realm – would see an accelerated phase out of the surcharge.
Together, the commission said these proposals would tackle the remaining barriers to investment and job growth which exist in the current tax regime, according to the report.
ESTATE TAX REFORM
New York state remains one of 17 states with either an estate tax or an inheritance tax, and only two states currently have a lower exemption.
Also, the estate tax thresholds have not kept pace with the rise in home values, causing more and more middle-income New Yorkers finding themselves subject to the tax, the commission said.
Therefore, a reform of the estate tax was suggested along with increasing the state’s threshold to $5.25 million, indexing to inflation and lowering the tax rate.
According to Heather C. Briccetti, president and CEO of the Business Council of New York state, when fully implemented, the package would provide about $500 million in permanent, annual business tax relief, as well as an estimated $100 million in business savings from expedited phase-out of energy assessments over the next two years.
“Obviously any time we can get tax relief for the overburdened property owners of Chautauqua County, it’s very, very important,” Horrigan added. “It’s encouraging to see the governor embrace property tax relief which has been in the past a barrier to both businesses and new property owners in Chautauqua County as well as existing property owners.”