ALBANY, N.Y. (AP) - New York’s new budget will cut business and estate taxes over the next several years, lowering the corporate tax rate to 6.5 percent in 2016 while raising tax exemptions for inherited wealth by about $1 million annually to $5.25 million in 2017.
With the Cuomo administration trying to shed the state’s reputation for high taxes and complex regulations, the Legislature adopted his main proposals and revised some, making the estate thresholds gradual followed by inflation indexing, but leaving that top tax rate at 16 percent.
For manufacturers, they agreed to establish a 20 percent property tax credit statewide and cut their corporate tax rate to zero. The administration originally proposed the zero rate for upstate New York.
“We’re trying to attract business,” Gov. Andrew Cuomo said Tuesday, adding the state has high taxes and a complicated code. “We’re trying to keep business here.”
On Wednesday, the Tax Foundation, a Washington-based policy group, said New Yorkers had the highest state and local tax burden in the country in 2011, paying 12.6 percent of their collective incomes that year.
The new state budget also contains tax freezes or possible cuts for property owners in localities that stay within a 2 percent cap and take cost-cutting steps.
In the effort to simplify the code, the accompanying legislation eliminates New York’s bank tax and instead subjects banks to the corporate tax. On provision will let banks, including the big Wall Street banks, pay taxes on only 8 percent of their income from “qualified financial instruments,” meaning securities, assuming about 92 percent comes from sales to customers outside New York.
The state corporate tax rate has dropped incrementally since 1999 from 9 percent to the current rate of 7.1 percent.
Kathryn Wylde, president of the Partnership for New York City, a group advocating for city’s position as the center of world commerce, said Cuomo kept his “record of credibility in the business community. … This year, we are thrilled to see serious corporate tax reform that will encourage job creation and business investment,” she said.
The state Senate’s Republicans said the estate tax changes, raising the exemption threshold from $1 million previously to more than $2 million immediately followed by further increases, will encourage more of the state’s 2,800 family farms to pass to the next generation.
The tax legislation was signed by Cuomo shortly after the Senate and Assembly passed it Monday.
Advocates for low-income New Yorkers criticized the tax provisions, saying they favor the wealthy.
“It’s three tiers of the giveaway cake,” Michael Kink, of the group Strong Economy for All, said of the estate, corporate and bank tax provisions. He noted the governor and lawmakers approved inflation indexing for the estate tax exemptions while rejecting indexing last year for the minimum wage, which they raised to $8 an hour.
The budget included neither New York City Mayor Bill de Blasio’s proposal to let cities set their own higher minimum wage nor accelerating the statewide minimum, already scheduled to rise to $9 next year.
According to the state Budget Division, state tax revenues overall are projected to increase by $1.4 billion this year based on expected economic growth despite the tax cuts.
The manufacturers’ tax cut is expected to cut revenues by $193 million in fiscal year 2015, while the corporate rate cut is expected to cut revenues $141 million in tax year 2016, division spokesman Morris Peters said. The 8 percent provision for taxing bank securities income is expected to actually increase tax collections because under the old law most of that income was deducted and not taxed by New York, he said.
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