Tax Relief Commission Addresses Property and Business Taxes

By:
RICHARD J. KORETO
Published Date:
Jan 7, 2014

With his state-of-the-state address due for delivery on Jan. 8, Cuomo's mind is clearly focused on taxes. Indeed, the ink is still wet on the report of the Tax Relief Commission, chaired by Carl McCall and George Pataki, which focused on property tax relief for homeowners, incentives to local governments to reduce cost of operations, lowering the corporate tax rate and updating the estate tax. And on Jan. 6, Cuomo issued a press released detailing a $2 billion tax relief plan, which may become a centerpiece of tomorrow's address.

There has been so much talk of taxes in Albany in recent weeks it's easy to get confused: Not long before the Tax Relief Commission issued its recommendations, the Tax Reform and Fairness Commission also issued a report—and there was some overlap—McCall was co-chair of both commissions, and Jim Wetzler, a former state tax commissioner, was another dual member. The Relief commission did acknowledge the work of the Fairness commission, saying that it endorsed most of its proposals to simplify the structure of New York's tax system by eliminating nuisance taxes.

In the Jan. 6 release, Cuomo stated that he looked forward to working with the legislature to enact recommendations of both the Relief and Reform commissions into law.

Looking at the Key Proposals

The Relief commission's 15-page report stressed difficulties with the state's property taxes,  nothing that New Yorkers paid some of the highest property taxes in the nation, in both absolute terms and as a percentage of home value. The commission proposes a two-year program to freeze property taxes for homeowners in jurisdictions that abide by the 2 percent tax cap. In year one, homeowners would get a tax rebate equal to the amount of the increase in their tax bill. In the second year, homeowners would receive a rebate of their tax increase only if jurisdictions took certain steps to save money by sharing services with other jurisdictions or consolidating governments. "Only through such bold steps can New York hope to achieve a long-term reduction in real property taxes," said the report.

For businesses, the commission recommends reducing the property tax on manufacturers. Its proposal is to offer a corporate and income tax credit equal to 20 percent of the amount of real property taxes manufacturers pay. Upstate manufacturers should get an even better deal.

And that's not the only break the commission would like to see for businesses. To spur economic growth, it's suggesting the reform and simplification of the primary corporate income taxes and a reduction in the corporate income tax rate to 6.5 percent—the lowest corporate rate since 1968.

For financial entities, the Relief commission recommends merging the corporate franchise and banking franchise taxes, as the Tax Reform and Fairness Commission suggested, with some changes and additional rate relief for all corporate taxpayers.

Estates were also addressed. The commission pointed out that New York is one of only 17 states with either an estate tax or an inheritance tax. In addition, only two states have a lower exemption. Because estate tax thresholds have not kept pace with the rise in home values, according to the report, an increasing number of middle-income New Yorkers are finding themselves liable for state estate tax. To provide relief, the commission is suggesting increasing the threshold to $5.25 million--which will be indexed for inflation—and lowering the tax rate to 10 percent.

How the Numbers Add Up

By the 2016-2017 tax year, the commission believes the state's taxpayers will see some $2 billion in savings, including $1 billion in property tax savings, $381 million in estate tax savings and $346 in corporate tax reform.

Of course, all of these recommendations are just in the suggestion stage. Albany will need to make legislative changes to implement these suggestions and there's no clear indication yet how much support these proposals have. Cuomo may very well give more details on how he plans to proceed in his address.

Click here to see more of the latest news from the NYSSCPA.