The Tax Foundation has published a report which says that New York’s recently enacted corporate tax overhaul will broaden the base, lower rates and reduce the complexity of the formerly flaws tax code.
To be specific, they claim it will push the state’s corporate tax ranking in the Tax Foundation’s State Business Tax Climate Index up to 4th place from the current position in the middle at no. 25.
That’s a huge jump, and the only reason it isn’t reflected in the current rankings is because the reforms made through the FY 2014-15 budget signed into law by Gov. Cuomo have not yet gone into full effect.
You’ll need to roll up your sleeves and sit back to go through the full report, but here’s some of the highlights:-
- Four tax bases for calculating corporate tax reduced to three as of FY 2015, with a plan to reduce it to two in the near future;
- Corporate net income tax rate reduced from 7.1 to 6.5 percent;
- Bank tax system merged into corporate tax system;
- Estate tax to be recoupled to federal threshold, exempting small businesses from a large tax when ownership is transferred. Also, the generation skipping transfer tax is repealed;
- Net operating loss carrybacks extended to three years. NOL carryforwards still 20 years, same as federal law; and
- Individual add-on Minimum Tax repealed.
It could be said that New York was on its way to making these changes anyway. But the Tax Foundation does get a bit of the credit for it.
Earlier this year, the Cuomo Administration apparently reached out to the Tax Foundation, seeking suggestions for improving New York State’s tax climate. The administration got an earful about the flawed corporate tax code, and a whole bunch of recommendations on how to fix it.
The fact that the Tax Foundation is now willing to bump NY right up into 4th place suggests that their suggestions have been heeded in the reforms enacted.
“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.”
Gov. Cuomo responded with a statement that says – “This year’s budget builds on positive reforms included in our three prior budgets, which have greatly improved the business and tax climate in the state and changed the trajectory of New York’s economic standing. This dramatic improvement, demonstrated by the upward progress in today’s Tax Foundation report, serves as further proof that after decades of decline, New York is reclaiming its reputation as a great place to do business.”
Photo credit – NY Governor’s Office