Business taxes in New York include the corporate income taxes, payroll taxes, and unincorporated business taxes paid by employers operating within the state and city. This page covers CBC’s work on corporate tax rates, economic competitiveness, business tax incentives, the Industrial and Commercial Abatement Program, and the impact of tax policy on regional economic growth.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The State and City should hold the line on taxes and not include any tax increases in the one-house or enacted budgets.
Instead of raising taxes, the State and New York City should double down on getting the most out of their existing budgets by efficiently delivering high-quality services.
The State should hold the line on taxes to maintain economic competitiveness.
Policymakers should review and reduce burdensome regulations that do not serve New Yorkers' interests.
The State should curb the $5 billion in economic development tax breaks, capital spending, and programs that fail to deliver results.
The State should shift funding from lower-impact programs to affordability and other priority needs.
The State should drive service quality and efficiency improvements with performance data, accountability, and targeted programs.
Key Data
As of April 2026, New York City has the nation’s highest top combined personal income and business tax rates, with the state and its localities collecting 38 percent more taxes per person than New Jersey and 40 percent more than California.
As of February 2026, New York City residents face a combined top marginal personal income tax rate of 14.776 percent, which is the highest in the nation.
In fiscal year 2025, statewide business tax collections in New York totaled $19.7 billion, including $7.4 billion from City corporate taxes and $3.6 billion from the City unincorporated business tax.
As of August 2024, the cost of the Industrial and Commercial Abatement Program (ICAP) has grown six-fold, rising from $81.4 million in fiscal year 2017 to $506.3 million in fiscal year 2024.
The state budget avoids raising personal income and corporate taxes, which is a positive step, but it fails to address long-term fiscal stability by neglecting reserve funds and creating a structural gap exceeding $17 billion. While the budget includes some beneficial policy changes, it relies on excessive spending growth and questionable financial maneuvers that shift costs to future taxpayers.
Recommendations related to Business Taxes
The Governor should continue to resist calls to increase personal income and corporate taxes next year.
Key Data
$17 billion
— The structural gap left by the budget.
8 percent
— The minimum increase in State Operating Funds spending.
$30 billion
— The amount by which decade-long spending growth exceeds inflation.
$1 billion
— The amount allocated for energy rebates across millions of households.
$700 million
— The amount wasted annually by increasing school aid to districts with shrinking enrollment.
$547 million
— The cost of increasing Tier 6 pension benefits.
New York City faces significant economic challenges, including high outmigration, stagnant job growth, and a high cost of living, all exacerbated by having the nation's highest combined personal income and business tax rates. To maintain competitiveness and ensure prosperity, city leaders must prioritize fiscal discipline, improve government efficiency, and avoid further tax increases while addressing housing and service quality.
Recommendations related to Business Taxes
The mayor and City Council should adopt a sound budget that improves services, expands effective programs, eliminates ineffective ones, enhances affordability and holds the line on taxes.
City leaders should avoid raising already high taxes, which risks alienating residents who disproportionately fund services and businesses that create jobs.
Key Data
38%
— The state and its localities collect more taxes per person than anywhere else, which is 38% more than New Jersey.
40%
— The state and its localities collect more taxes per person than anywhere else, which is 40% more than California.
41
— Between 2020 and 2025, the number of publicly traded company headquarters in New York State declined by 41.
6,350
— The city lost a net 6,350 businesses in the first three quarters of 2025.
$127 billion is the size of NYC's Preliminary Budget for Fiscal Year 2027. After reporting a yawning $12 billion budget gap estimate, Mayor Mamdani revised that number down to $5.4 billion, thanks in part to Governor Hochul's willingness to chip in. But don't let the shrinking gap fool you: the…
The NYC Fiscal Year 2027 Preliminary Budget faces a $9.4 billion gap, which the city proposes to close through tax increases and the use of nonrecurring resources like reserves. Instead of raising taxes, which threatens economic competitiveness, the city should prioritize operational efficiency and spending reductions to achieve long-term fiscal sustainability.
Recommendations related to Business Taxes
The City should reject tax increases that would harm the City’s economic competitiveness and place additional burdens on residents and businesses.
The City should reduce ineffective spending and improve operational efficiency, including spending on education, procurement, and administrative operations.
The City should right-size spending in areas where demand has changed, such as adjusting school funding to reflect declining enrollment and managing the growth of the FHEPS housing voucher program.
The City should build and maintain adequate reserves by not drawing down the rainy day fund or RHBT and including $1 billion of in-year reserves.
Key Data
$9.4 billion
— The combined fiscal year 2026 and 2027 budget gap.
$3.7 billion
— The amount of revenue expected from the proposed property tax increase.
$16 billion
— The amount by which fiscal year 2026 spending exceeds what it would have been if it had grown at the rate of inflation since fiscal year 2017.
$15 billion
— The estimated funding required to mitigate the effects of a significant economic downturn over two years.
$1.2 billion
— The amount drawn from the rainy day fund and the Retiree Health Benefits Trust to close the budget gap.
$1 billion
— The amount of in-year reserves the city should include to protect against economic downturns.
New York already maintains the highest tax burden in the nation, and further tax increases would threaten the state's economic competitiveness by driving away businesses and high-income residents. Instead of raising taxes, the state and city should focus on improving fiscal efficiency and delivering high-quality services within existing budget constraints.
Recommendations related to Business Taxes
The State and City should hold the line on taxes and not include any tax increases in the one-house or enacted budgets.
Instead of raising taxes, the State and New York City should double down on getting the most out of their existing budgets by efficiently delivering high-quality services.
Key Data
17.44 percent
— Business activity in New York City is taxed at this rate, which is much higher than the 11.5 percent rate in New Jersey.
41
— The number of publicly traded company headquarters in New York shrank by this amount between 2020 and 2025.
$44 billion
— State taxes this fiscal year are projected to be this much higher than they were five years ago.
14.776 percent
— The combined top marginal personal income tax rate for New York City residents is currently this amount.
$29.5 billion
— State operating funds spending has increased by this amount more than inflation over the last 10 years.
$76 billion
— If New York State and its localities spent at the same level as New Jersey, they would save this amount.
New York City faces a significant budget shortfall, but raising taxes on large businesses and top earners risks weakening the city's economic competitiveness given that it already imposes the nation's highest tax rates. Instead of increasing taxes, the city should focus on fiscal discipline by cutting unproductive spending, streamlining operations, and implementing performance management systems to improve service delivery.
Recommendations related to Business Taxes
The City should spend its $120 billion budget efficiently on effective programs before considering asking New Yorkers for more.
The City should avoid raising taxes on large businesses and top earners, as increases would weaken the City’s ability to attract and grow businesses.
The Administration should implement a citywide performance management system to improve services and guide smarter budget decisions.
The City must update 20th Century labor relations, technology, and bureaucratic processes to meet 21st Century needs.
The Mayor should request relief from Albany’s class size mandate that costs the City $1 billion.
Key Data
$8 billion
— Estimated budget gap facing New York City.
17.44%
— NYC's combined corporate tax rate, which is significantly higher than New Jersey's.
11.5%
— New Jersey's combined corporate tax rate.
$3 billion
— Annual cost to the City due to its shrinking share of the nation's millionaires.
$1 billion
— Cost to the City of Albany's class size mandate.
$2.3 billion
— Amount the City spent over what it received in revenue over the past three years.
New York City businesses currently face the nation's highest combined corporate tax rate of 17.44 percent, and proposed increases would raise this to 22.48 percent, nearly double the rate in New Jersey. To maintain economic competitiveness, the state should avoid further tax hikes and instead focus on reducing burdensome regulations and curbing ineffective economic development spending.
Recommendations related to Business Taxes
The State should hold the line on taxes to maintain economic competitiveness.
Policymakers should review and reduce burdensome regulations that do not serve New Yorkers' interests.
The State should curb the $5 billion in economic development tax breaks, capital spending, and programs that fail to deliver results.
The State should shift funding from lower-impact programs to affordability and other priority needs.
The State should drive service quality and efficiency improvements with performance data, accountability, and targeted programs.
Key Data
17.44%
— The top combined corporate tax rate faced by New York City businesses, which is the highest in the nation.
22.48%
— The projected top combined marginal corporate tax rate in New York City if the State's top rate were raised to match New Jersey.
$19.7 billion
— Total statewide business tax collections in fiscal year 2025.
$4 billion
— The projected cost of the proposed increase in the New York State corporate franchise tax.
$4.7 billion
— Total Payroll Mobility Tax collections in 2026, which more than doubled from $1.8 billion in 2022.
$5 billion
— The amount in economic development tax breaks, capital spending, and programs that fail to deliver results that should be curbed.
New York State and its localities lead the nation in tax collections, with the highest per-capita tax burden and the highest corporate income tax collection per $1,000 of state GDP. This high tax environment persists despite the state also ranking third in the nation for per-capita spending.
Key Data
$18.4
— New York and its localities collected this amount in corporate income taxes per $1,000 of State GDP in 2023, the highest of all states.
49
— The number of states that tax less than New York regarding corporate income tax.
$12,495
— The amount of total state and local taxes collected per capita in New York in 2023, which is the highest of all states.
New York State's Fiscal Year 2027 Executive Budget includes a structural gap exceeding $15.0 billion, while extending a business tax surcharge that keeps business activity in New York City taxed at 17.44%. To maintain fiscal stability and competitiveness, the state should avoid raising taxes, prioritize core programs, and scale back wasteful economic development spending.
Recommendations related to Business Taxes
The Governor and Legislature should hold the line on taxes to keep New York competitive for families and businesses.
The Governor and Legislature should hold the line on taxes, prioritize core programs, and avoid adding unaffordable spending.
The State should scale back less impactful spending, including wasteful economic development programs, to fund programs for those in need.
Key Data
17.44%
— The rate at which business activity in New York City will continue to be taxed due to the extended business tax surcharge.
$1.3 billion
— The amount of the annual budget gap reduction attributed to the extension of the business tax surcharge.
$3.3 billion
— The portion of fiscal year 2025 economic development spending that consisted of tax breaks.
$5.1 billion
— Total New York State spending on economic development in fiscal year 2025.
New York faces significant economic challenges, including high taxes and outmigration, which threaten its long-term competitiveness and affordability. To address these issues, the state must manage its finances more effectively by scaling back ineffective programs, streamlining regulations, and maintaining a stable tax environment to attract and retain businesses.
Recommendations related to Business Taxes
State leaders should reduce the cost of doing business by eliminating unnecessary regulations, reforming the tort system to reduce insurance costs, and letting the business tax surcharge expire.
State leaders should leverage proven, cost-effective tax incentives to attract and retain businesses and shrink or eliminate tax incentives and economic programs that are not proven to create jobs or increase output.
State leaders should hold the line on taxes to demonstrate a commitment to a competitive future, as increasing already-high taxes threatens New York's competitiveness and risks accelerating outmigration.
Key Data
$258 billion
— The fiscal year 2026 All Funds budget exceeds this amount.
$20 billion
— The amount by which state recurring spending exceeds its recurring receipts annually, creating a structural budget gap.
4.7 percent
— The rate of New York State's population growth since 2000.
20.9 percent
— The rate of the nation's population growth since 2000.
12 percent
— The decline in public school enrollment since 2021.
$2.6 billion
— The amount of school aid currently provided to wealthy school districts that fund a sound basic education locally.
The proposed New York State fiscal year 2026 budget threatens the state's economic competitiveness by rapidly increasing spending and raising taxes, including personal income and business taxes, while failing to address the structural budget gap. To strengthen the state's long-term fiscal foundation, the state should restrain spending growth, protect reserves, and avoid tax hikes while redirecting funds toward more impactful uses.
Recommendations related to Business Taxes
Do not extend or increase personal income and business taxes.
New York State and its localities lead the nation in tax collections, with per capita taxes reaching $12,751 in 2022. The state also imposes the highest corporate income tax burden in the country, collecting $19 per $1,000 of state GDP.
Key Data
$19
— New York and its localities collected the most corporate tax per $1,000 of State GDP.
49
— Number of states that tax less than New York regarding Corporate Income Tax.
$12,751
— Total state and local taxes collected per capita in New York, the highest of all states.
$169
— Total state and local taxes collected per $1,000 of personal income in New York.
$2,730
— Sales tax revenue per capita collected by New York state and localities.
$59
— Personal income tax collected per $1,000 of personal income in New York.
New York City collected $10,084 million in business taxes during fiscal year 2024, while New York State recorded $14,384 million in business tax revenue for the same period. These figures are part of the comprehensive financial data provided for the fiscal year 2024.
Key Data
$10,084 Million
— New York City operating budget revenue from business taxes in FY 2024.
$14,384 Million
— New York State governmental activities revenue from business taxes in FY 2024.
$10,093 Million
— New York City operating budget revenue from business taxes in FY 2023.
$13,205 Million
— New York State governmental activities revenue from business taxes in FY 2023.
New York City's Industrial and Commercial Abatement Program (ICAP) has seen its costs grow six-fold to over $500 million annually, yet evidence suggests that the vast majority of projects receiving these tax breaks do not actually require them to be financially feasible. The program should not be renewed without a thorough, objective evaluation to ensure it is a cost-effective use of public funds.
Recommendations related to Business Taxes
The Governor should veto S9822/A10530 because it extends the Industrial and Commercial Abatement Program without assessing its necessity.
The Governor should sign a one-year extension, negotiated as a Chapter amendment, to allow time for an objective evaluation of the program.
Policymakers must identify eligibility and benefit changes to improve the cost-effectiveness of the Industrial and Commercial Abatement Program.
The state should evaluate whether an extension would be cost-effective before committing to a multi-year renewal of the program.
Key Data
3.6 percent
— The percentage of projects receiving ICAP benefits that actually required the tax breaks to be financially feasible.
$81.4 million
— The cost of the ICAP program in fiscal year 2017.
$506.3 million
— The cost of the ICAP program in fiscal year 2024.
Two-thirds
— The portion of ICAP recipients that receive 25-year abatements, which is twice as long as necessary.
$500 million
— The amount spent per year on the program without a determination that it is an effective use of public funds.
The state should avoid raising the Payroll Mobility Tax by $1 billion annually to replace congestion pricing, as this would further burden businesses that already faced a $1.1 billion tax increase last year. Instead of increasing business taxes or depleting reserves, the state should proceed with the original congestion pricing plan to fund MTA capital investments.
Recommendations related to Business Taxes
The State should not now raise the Payroll Mobility Tax $1 billion annually to replace congestion pricing.
Policymakers should avoid alternatives that raise New York’s already highest-in-the-nation business taxes.
Key Data
$1 billion
— The amount the State should not raise the Payroll Mobility Tax annually to replace congestion pricing.
$1.1 billion
— The amount by which business taxes were raised last year to fund the MTA operating budget.
Alternatives to congestion pricing, such as increasing New York’s already highest-in-the-nation business taxes or depleting state reserves, would result in significant negative consequences. Maintaining the current congestion pricing plan is essential to provide critical transit funding, reduce emissions, and ease traffic congestion.
Recommendations related to Business Taxes
Policymakers should avoid alternatives that raise New York’s already highest-in-the-nation business taxes or deplete the State’s precious reserves.
New York State and its localities maintain the highest tax burden in the nation, collecting more revenue per capita and per $1,000 of personal income than almost every other state. This high tax environment includes corporate income taxes, where New York collects more revenue per $1,000 of state GDP than 45 other states.
Key Data
$6
— New York's total state and local corporate income tax revenue per $1,000 of state gross domestic product in 2021.
45
— Number of states that collect less corporate income tax per capita than New York.
136%
— The amount more in corporate income taxes per $1,000 of state GDP that New York and its localities collected compared to Florida.
New York faces a projected $9 billion budget gap that is expected to grow to $13 billion, necessitating spending restraint rather than further tax increases or reserve depletion. Extending temporary business and personal income taxes would undermine the state's economic competitiveness, making it essential to address structural spending growth instead.
Recommendations related to Business Taxes
The state should avoid another round of tax increases as part of the package to close budget gaps.
The state should not extend temporary business taxes, as doing so would make the state less economically competitive.
Key Data
$9 billion
— Projected budget gap for next year.
$13 billion
— Projected budget gap growth following next year.
$22 billion
— Structural hole the state will face once temporary funds are exhausted.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
The New York State Fiscal Year 2024 budget extends temporary business and personal income tax surcharges for three years, maintaining some of the highest tax rates in the nation. This approach threatens the state's economic competitiveness and risks future fiscal instability by increasing long-term structural deficits.
The New York State Fiscal Year 2024 Executive Budget projects an $8.7 billion surplus, which is primarily allocated to prepaying debt and reserve deposits. Despite this surplus, the budget faces future fiscal challenges, including widening out-year budget gaps and a proposal to raise $1 billion by extending a temporary corporate tax increase.
Key Data
$1 billion
— The amount of revenue the state proposes to raise by extending the temporary <b>corporate tax increase</b> for another three years.
New York's Unemployment Insurance Trust Fund is currently insolvent, leaving the state with $8.1 billion in debt that has forced significant tax increases on employers. To address this, the state must weigh the trade-offs of using tax receipts or federal aid to pay down the debt versus allowing higher employer tax burdens to persist until the fund returns to solvency.
Recommendations related to Business Taxes
The State should pay off the debt over time with higher tax rates, which is the standard practice.
The State could partially accelerate repayment of the debt using State revenues.
The State could rapidly pay off the debt using State revenues, which would provide immediate tax relief to employers.
The State could tap higher-than-expected tax receipts and unallocated federal aid to repay the debt more quickly.
Lawmakers should consider reforming the UI system to ensure it is better equipped to meet claims during economic downturns.
Key Data
$8.1 billion
— Amount the Trust Fund owes to the federal government as of June 7, 2022.
$14.7 billion
— Total unemployment payments in New York for the year 2020.
$2.65 billion
— Balance of the UI Trust Fund in February 2020, prior to the pandemic.
$110 million
— Interest accumulated for the federal fiscal year 2022.
$530 million
— Total UI benefits paid out in New York in the fourth quarter of 2019.
$6.5 billion
— Total UI benefits paid out in New York in the second quarter of 2020.
New York currently imposes the highest combined top personal income and corporate tax rates in the nation, a policy that threatens economic competitiveness and risks eroding the tax base. To stabilize the state's fiscal foundation and improve long-term competitiveness, the state should allow scheduled tax increases to sunset while restraining spending.
Recommendations related to Business Taxes
The enacted State budget should allow the business tax increase to sunset.
The State should restrain spending to allow the personal income tax increase to sunset sooner or at least as scheduled.
Key Data
22 percent
— Decline in New York's share of the nation's millionaires from 2010 to 2019.
NY1 “We have, with the tax increase of last year, the highest top marginal personal income tax in the country, and the highest corporate franchise tax in the country. And we were losing millionaires before the SALT cap. How big a threat are high taxes?” said Andrew Rein of the…
New York's fiscal plan for 2023 is balanced, but the state should prioritize restraining recurring spending and managing programs for better results rather than relying on temporary revenue surges. To improve economic competitiveness, the state should also reverse the recent tax increases that resulted in the nation's highest combined business and personal income tax rates.
Recommendations related to Business Taxes
New York should start to roll back last year’s tax increases that made New York’s combined business and top personal income tax rates the highest in the nation.
New York's economic development programs, which cost $10 billion annually, lack the transparency and rigorous evaluation necessary to demonstrate their effectiveness. Rather than relying on these incentives to offset the state's high business and personal income taxes, the state should implement unified budgeting, standardized metrics, and improved oversight to ensure accountability.
Recommendations related to Business Taxes
The State should present a unified economic development budget so that New Yorkers know how much is really being spent.
The State should establish standardized metrics for economic development initiatives to identify the impact of each deal and program.
The State should improve its Database of Deals to publicly and regularly report on the cost, progress, and evaluation of all economic development initiatives.
Program design should be improved by requiring private 'skin in the game,' performance metrics, and penalties for non-performance.
Oversight should be improved by restoring the procurement oversight powers of the Comptroller’s Office and increasing funding for the Authorities Budget Office.
Key Data
$10 billion
— Total annual cost of economic development programs in New York State in 2019.
8 of 20
— Number of criteria for a sound database met by the current Database of Economic Incentives.
New York State currently maintains the highest top personal income and corporate tax rates in the nation, which creates fiscal risks by incentivizing high-income individuals and businesses to relocate. To foster economic competitiveness and mitigate volatility, the state should lower, reverse, or allow these recent tax increases to sunset.
Recommendations related to Business Taxes
Given the State’s stronger-than-expected receipts throughout the pandemic, the latest tax increases should be lowered, reversed, or at least allowed to sunset.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
New York State's fiscal year 2022 budget agreement includes unnecessary tax increases that threaten economic competitiveness despite the availability of $22 billion in additional funds. These measures raise personal income and corporate taxes by over $4.3 billion annually, increasing the cost of doing business and risking the departure of individuals and companies.
Recommendations related to Business Taxes
The State should avoid raising personal income and business taxes, as they are unnecessary and economically risky.
The State should prioritize maintaining economic competitiveness rather than increasing the cost of doing business.
The State should leverage the infusion of funds to stabilize New York’s fiscal picture instead of relying on tax increases.
Key Data
$4.3 billion
— The amount by which lawmakers agreed to raise personal income and corporate taxes annually.
0.75 percentage points
— The amount by which corporate taxes will be increased, further raising the cost of doing business in New York.
$22 billion
— The amount of additional funds available over the next two years compared to the Governor's initial budget proposal, rendering tax increases unnecessary.
New York's legislative budget proposals for fiscal year 2022 include tax increases on businesses and high earners that are unnecessary given the state's revenue strength and federal aid. These proposed tax hikes, including increases to the corporate franchise tax, threaten the state's economic competitiveness and risk driving away businesses that are already subject to the nation's highest combined tax rates.
Recommendations related to Business Taxes
The state should enact a budget that does not raise income and business taxes.
Policymakers should avoid increasing the corporate franchise tax, as New York City businesses are already subject to the highest combined state, city, and MTA taxes in the nation.
The state should prioritize maintaining competitive taxes to ensure New York remains an attractive place to live and conduct business.
Key Data
$7 billion
— Amount of new annual revenue that would be generated by the proposed tax increases on high income earners and businesses.
16.49 percent
— Current combined State, City, and MTA tax rate for New York City businesses, which is already the highest in the nation.
$1.2 million
— Average amount paid annually to both the State and City by New Yorkers who earn over $10 million.
$9.6 billion
— Projected State surplus over the next two years if the Executive Budget is adopted as is.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
New York faces significant budget gaps of $8 billion this year and $17 billion next year, leading some to propose reinstating the dormant stock transfer tax. However, reviving this tax would likely drive securities firms to relocate, reduce tax revenue, and increase costs for individual investors, making it an ineffective solution for the state's fiscal challenges.
Recommendations related to Business Taxes
Policymakers should leave the STT dormant and find alternative ways to fill the budget gap.
New York’s leaders should reject proposals to revive the STT.
Key Data
$8 billion
— Estimate of New York State's current budget gap.
$17 billion
— Projected budget gap for New York State next year.
$13 billion
— Amount advocates claim the stock transfer tax could yield in annual revenue.
$4 billion
— Amount the stock transfer tax would have yielded in fiscal year 2020.
18 percent
— Portion of State tax collections accounted for by the securities industry in fiscal year 2020.
30 percent
— Outflow of trading activity in listed Swedish companies after the country introduced a 2 percent stock transfer tax in 1984.
New York State and City face significant budget gaps, yet their high combined corporate franchise and personal income tax rates threaten economic competitiveness and risk driving away high-income earners. To address fiscal challenges, leaders should prioritize expenditure control and federal aid rather than tax increases, as the state's share of national millionaires and their capital gains has already declined.
Recommendations related to Business Taxes
Improving the fiscal outlook for both the State and the City primarily requires controlling expenditures and advocating for federal aid.
Any consideration of tax increases should include the impact on State and local economic competitiveness.
As New York’s leaders look to close budget gaps, they must be cognizant that combined State and City PIT rates are the second highest in the nation, while combined CFT rates are the highest.
Key Data
16.49 percent
— The total effective corporate franchise tax rate on businesses operating in New York City.
$1.4 billion
— The amount of additional tax revenue New York could have generated if its share of national millionaire capital gains had remained at 2010 levels.
12.696 percent
— The combined top personal income tax rate imposed in New York City, which is the second highest in the country.
8.85 percent
— The local New York City corporate franchise tax rate on business conducted in the City.
$8 billion
— The potential budget gap faced by New York State in fiscal year 2021.
$15 billion
— The potential budget gap faced by New York State in fiscal year 2022.
New York's Health Care Reform Act (HCRA) taxes, which generate nearly $6 billion annually, increase health insurance premiums by at least 4.3% and depress wage growth for many New Yorkers. Lawmakers should avoid increasing these taxes as a strategy for balancing the Medicaid budget, as they place a significant cost on both the state and privately insured residents.
Recommendations related to Business Taxes
Lawmakers should avoid increasing HCRA taxes as a strategy for balancing the Medicaid budget.
Lawmakers should review HCRA’s role in health care funding and its impact upon privately insured New Yorkers.
Key Data
$6 billion
— Annual HCRA receipts generated by the tax structure.
4.3 percent
— Combined impact of HCRA taxes on health insurance premiums.
$1,000
— Statewide average annual cost of HCRA taxes for a family plan.
$700 million
— Annual amount the State pays via HCRA taxes through Medicaid surcharges and insurance premiums for its workforce.
$557 million
— Annual amount the federal government pays toward Surcharge revenue.
New York City's property tax system, which generates nearly $30 billion in annual revenue, requires reform to improve equity and transparency while maintaining fiscal stability. Proposed changes include transitioning to market-value assessments, eliminating the current class share system, and implementing income-based rebates to ease tax burdens on residents.
Recommendations related to Business Taxes
Move cooperatives and residential condominiums to Class 1, leaving commercial property (Class 4) as a distinct class.
Valuation for tax purposes should reflect actual real estate market value, using more transparent methods for commercial property.
Full market value should be the starting point for assessing the tax base, with increasing effective tax rates for commercial properties.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates of owner-occupied residential property taxes should be provided based on household income when tax bills exceed a set share of income, replacing certain existing tax reduction programs.
Transition to the new system should occur over a five-year period.
Key Data
$30 billion
— Amount of revenue the property tax will generate in fiscal year 2020.
32 percent
— Portion of all City revenues generated by the property tax in fiscal year 2020.
$1 out of every $3
— Amount of City spending funded by the property tax.
6.2 percent
— Average annual growth of property tax revenue since fiscal year 1999, adjusted for tax policy changes.
The Opportunity Zone program, designed to encourage investment in low-income communities, may cost New York State and City millions in lost tax revenue while lacking necessary transparency and accountability measures. State lawmakers should consider requiring reporting on fund activities or decoupling from the federal program to ensure tax benefits are well-targeted and provide public value.
Recommendations related to Business Taxes
The State can require Opportunity Funds operating in New York State to report on their activity in order to qualify for state tax benefits.
In addition, the State could require funds to report annually on the value of gains invested by New York State taxpayers in qualified opportunity funds.
One option to decouple in part would be to limit the types of OZ projects that would qualify for state tax benefits.
Another option would be to limit the number of OZs in which taxpayers could claim state benefits.
A third option is to decouple fully from the federal program.
Key Data
$2 billion
— Estimated annual cost in lost federal revenue due to the Opportunity Zone program.
$63 million
— Estimated annual cost to New York State taxpayers from conforming to the federal Opportunity Zone program.
$31 million
— Estimated annual cost to New York City taxpayers from conforming to the federal Opportunity Zone program.
$6 trillion
— Estimated amount of unrealized capital gains held by taxpayers nationally.
$53 billion
— Amount that funds reportedly intend to raise to invest in Opportunity Zone projects as of August 2019.
$9.4 billion
— Total cost of the Opportunity Zone program for federal tax years 2018 to 2022.
New York state legislators introduced 67 bills in 2019 aimed at economic development, many of which propose new or expanded tax incentives, credits, and exemptions for various industries and small businesses. These proposals include significant tax relief measures, such as a $275 million property tax exemption for small businesses and a $140 million corporate franchise tax break for manufacturers.
Key Data
$275 Million
— Fiscal impact of making real property owned by small businesses eligible for the STAR property tax exemption.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Annual cap for the new tax credit for music and video game production industries.
$30 Million
— Fiscal impact of increasing the credit per eligible farm employee under the Farm Workforce Retention Credit.
$10 Million
— Annual grant authorization for the GrowNY pilot program to provide technical assistance to growing businesses.
$8.25 Million
— Fiscal impact of the Capital Investment Jobs Retention Program, a refundable tax credit for eligible businesses.
The 2019 Economic Development Sweetener Scorecard tracks 69 legislative bills aimed at providing tax incentives, credits, and grants to various industries and small businesses across New York State. These proposed measures include significant fiscal commitments, such as $275 million for small business property tax exemptions and $140 million for manufacturing tax relief, intended to stimulate economic growth and job creation.
Key Data
$275 Million
— Fiscal impact of the School Tax Relief (STAR) program for small businesses with 100 employees or fewer.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Annual fiscal impact of the tax credit for music and video game production industries.
$30 Million
— Fiscal impact of the Farm Workforce Retention Credit.
$10 Million
— Fiscal impact of the GrowNY pilot program for economic gardening.
$8.25 Million
— Fiscal impact of the Capital Investment Jobs Retention Program.
The 2019 Economic Development Sweetener Scorecard tracks 67 legislative bills aimed at economic growth, many of which propose new or expanded tax credits, exemptions, and grants for various industries and small businesses. These proposed measures include significant fiscal commitments, such as a $275 million expansion of the School Tax Relief program to small businesses and a $140 million corporate franchise tax exemption for manufacturers.
Key Data
$275 Million
— Fiscal impact of making real property owned by small businesses eligible for the School Tax Relief (STAR) property tax exemption.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Fiscal impact of replacing Excelsior Jobs Program eligibility for music and video game production with a new tax credit capped at this amount annually.
$30 Million
— Fiscal impact of increasing the credit per eligible farm employee under the Farm Workforce Retention Credit.
$10 Million
— Fiscal impact of establishing the GrowNY pilot program to provide annual grants for technical assistance to growing businesses.
$8.25 Million
— Fiscal impact of establishing the Capital Investment Jobs Retention Program, a refundable tax credit for eligible businesses.
New York should implement an Unincorporated Business Tax to help residents and businesses mitigate the federal $10,000 cap on state and local tax deductions. This proposed tax would be optional, feature a 5 percent rate with a 93 percent personal income tax credit, and ideally exclude businesses with under $500,000 in taxable net income.
Recommendations related to Business Taxes
Expanding the proposed UBT to include S-corporations and sole proprietors would provide New Yorkers greater relief from the SALT cap.
Making the UBT optional by an election at the entity level would reduce risk to the taxpayer by providing choice.
Preserving the proposed 5 percent rate would provide significant benefit, substantially more than half of the SALT cap impact for the applicable income.
Preserving the proposed 93 percent personal income tax credit combined with the 5 percent rate will provide significant benefit.
Expressly reflecting in law that the UBT is not added back for taxable State income purposes would clarify the tax treatment for individual partners or members.
Making the UBT credit non-refundable is advisable because reducing the risk of a legal challenge to the tax outweighs the benefits of making it refundable.
Modifying statutory language to strengthen the case for deductibility by expressly stating that the UBT is a tax imposed on the net business operations of the unincorporated business itself may add substantive strength to the tax’s underlying logic.
Working with other states to align tax provisions is necessary to maximize the UBT’s benefits and minimize cases in which multiple states tax the same income.
Key Data
$10,000
— The federal cap on a taxpayer’s deduction of state and local taxes (SALT cap).
$500,000
— The suggested level of State taxable net income at which to impose the tax.
5 percent
— The proposed rate for the Unincorporated Business Tax.
93 percent
— The proposed personal income tax credit rate to be combined with the UBT.
This document tracks various New York State legislative proposals aimed at economic development, many of which involve tax incentives, credits, and exemptions for businesses. These proposed measures range from expanding existing programs like the Excelsior Linked Deposit Program to creating new tax-deferred savings accounts and job creation credits for small businesses.
Key Data
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program.
$200 Million
— Amount of the Excelsior Linked Deposit Program funding dedicated for business startups.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$20 Million
— Funding for the HIRE NY act to provide loans for microbusiness hiring.
$10 Million
— Annual grants authorized for the GrowNY pilot program to provide technical assistance to growing businesses.
$1.5 Million
— Funding for the Microenterprise Development Fund.
New York state legislators have introduced numerous bills aimed at economic development, including various tax incentives and grants for small businesses, manufacturers, and specific industries. These proposed programs range from corporate franchise tax exemptions to funding for microbusiness hiring and technology research, reflecting a broad legislative effort to stimulate state economic growth.
Key Data
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program.
$200 Million
— Portion of the Excelsior Linked Deposit Program funding dedicated to business startups.
$20 Million
— Fiscal impact of the HIRE NY act providing loans for microbusiness hiring.
$10 Million
— Annual grants authorized for the GrowNY pilot program.
$2 Million
— Fiscal impact of the Transitional Green Development Program.
New York City's tax burden is significantly higher than other large cities, with commercial property taxes and personal income taxes already at levels that could negatively impact economic competitiveness. Policymakers should exercise caution when considering further tax increases, as the city's tax rates are already outliers compared to regional and national competitors.
Recommendations related to Business Taxes
Policymakers should be aware that both personal income and commercial property taxes are already significantly higher than in other large cities and should examine options where New York City is not as far out of line with other cities.
Any initiatives to raise more revenue from the property tax should consider the current conditions where New York City imposes a property tax on commercial property that is much higher than in most competitive areas.
Policymakers should consider the impact on progressivity and regional competitiveness when evaluating potential changes to the New York City personal income tax.
Key Data
$964,000
— The annual property tax on a $25 million commercial property in New York City in 2012.
51%
— The amount by which New York City's commercial property tax was higher than the average for the other 14 of the 15 largest U.S. cities in 2012.
162%
— The amount by which New York City's commercial property tax was higher than in Hoboken, New Jersey, in 2012.
$800 Million
— The estimated annual revenue that would be raised by a 10 percent across-the-board surcharge on the New York City personal income tax.
$750 Million
— The estimated annual revenue that would be raised by a 0.75 percent increase in the top New York City personal income tax rate.
154%
— The amount by which New York City's commercial property tax was higher than in Los Angeles in 2012.
New York State should implement specific tax adjustments, including an optional Employer Compensation Expense Tax and an Unincorporated Business Tax, to maintain competitiveness and offset the impact of the federal Tax Cuts and Jobs Act. These measures, alongside technical business tax changes, aim to mitigate a $1 billion unplanned tax increase resulting from federal policy shifts.
Recommendations related to Business Taxes
Adopt the Governor's proposed technical business tax change clarifying that corporations may not reflect partial federal deduction on foreign income deemed repatriated on State tax returns.
Adopt an optional Employer Compensation Expense Tax (ECET) covering wages of high-salary employees; consider covering wages in excess of $200,000 and phasing up to a 6.65 percent rate.
Adopt an Unincorporated Business Tax (UBT) to preserve deductibility for pass-through entities; before finalizing, share proposal for public review and comment.
Consider broader reforms to improve competitiveness and streamline the tax system.
Decouple the personal exemption, enhanced child tax credit, and the state and local tax deduction cap from the federal definitions to mitigate $740 million of the $1 billion unplanned tax increase.
Key Data
$740 million
— Amount of the $1 billion unplanned tax increase that could be mitigated by decoupling personal exemptions and tax credits from federal definitions.
$1 billion
— Total unplanned tax increase resulting from the Federal Tax Cuts and Jobs Act.
$200,000
— Wage threshold for the proposed optional Employer Compensation Expense Tax.
6.65 percent
— Proposed rate for the optional Employer Compensation Expense Tax.
The federal Tax Cuts and Jobs Act threatens to reduce New York's economic competitiveness by capping state and local tax deductions, potentially driving residents and businesses away. This policy shift risks triggering unplanned increases in local personal income and business taxes, necessitating a strategic response to protect the city's economic stability.
The Tax Cuts and Jobs Act (TCJA) creates significant challenges for New York by capping state and local tax deductions, potentially reducing the state's competitiveness and driving $1 billion in unplanned personal income tax and $109 million in state business tax increases. New York must implement practical policy responses to protect its economy and taxpayers from these federal tax policy changes while allowing time for deeper analysis of complex issues.
Key Data
$1 billion
— Unplanned State personal income tax increase driven by the Tax Cuts and Jobs Act.
$109 million
— State business tax increases driven by the Tax Cuts and Jobs Act.
The Tax Cuts and Jobs Act created significant tax challenges for New York, including a $10,000 cap on state and local tax deductions and unplanned tax increases due to conformity with federal definitions. To maintain competitiveness and protect residents, the state should implement targeted tax reforms, such as an optional Employer Compensation Expense Tax and a business tax on pass-through entities, while also controlling spending.
Recommendations related to Business Taxes
The State should selectively decouple from federal definitions and continue to conform to others for at least one year to allow evaluation and additional reform.
The State should create an optional Employer Compensation Expense Tax (ECET) to blunt the impact of the SALT cap.
The State and localities should create the opportunity for taxpayers to receive tax credits for charitable contributions for public education and health purposes.
The State should create a business tax on pass-through entities, known as an Unincorporated Business Tax (UBT).
The State should limit action on business taxes to the proposed technical fix regarding deemed-repatriated income.
The State should consider reforming the estate tax to address New York’s attractiveness to high-income households.
The State and City should control spending to reduce the need for high State and local taxes.
Policymakers should consider broader reforms to simplify the tax system, such as broadening bases and lowering rates.
The State and the City must monitor the effects of TCJA and State and City responses to adjust policy as needed.
Key Data
$10,000
— The cap on a taxpayer’s deduction of state and local taxes (SALT) under the TCJA.
$1 billion
— The projected unplanned increase in New Yorkers’ State tax liability due to tax conformity.
$320 million
— The projected unplanned increase in New Yorkers’ City tax liability due to tax conformity.
$109 million
— The expected direct impact on New York’s businesses due to conforming to federal business tax definitions.
$330 million
— The amount CBC's recommendation for an ECET could save covered New Yorkers.
$421 million
— The amount of annual State income tax revenue lost if 2 percent of taxpayers earning more than $500,000 leave.
The proposed state budget includes a three-year deferral of business tax credits for taxpayers claiming over $2 million in aggregate credits, a move that would increase short-term revenue but worsen future budget deficits. Additionally, the budget suggests increasing taxes on for-profit health insurance companies and addressing the collection of sales taxes from online marketplaces to ensure parity with brick-and-mortar retailers.
Recommendations related to Business Taxes
If the business tax credits are unnecessary, they should be repealed; otherwise, the credits should be paid as scheduled.
The State should not increase taxes on for-profit health insurance companies to capture 'windfall' savings, as targeting this specific industry will ultimately increase consumer insurance costs.
Online sales should be subject to the same taxes as brick and mortar retailers, regardless of the intricacies of how those sales are arranged.
Key Data
$2 million
— Threshold for taxpayers subject to the proposed three-year deferral of business tax credits.
three-year
— Duration of the proposed deferral of business tax credits.
four
— Number of fiscal years the proposed business tax credit deferral would increase revenues.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York State provides various tax expenditures and credits to businesses, including specific benefits for manufacturers and participants in the START-UP New York program. These tax breaks encompass a wide range of incentives, such as sales tax exemptions for production equipment and credits for specific industries like beer production and historic property rehabilitation.
Key Data
$56,561
— In 2014, companies reported receiving $56,561 in tax benefits under the START-UP New York program.
$1.2 million
— In 2015, companies reported receiving $1.2 million in tax benefits under the START-UP New York program.
New York State's reliance on volatile personal income and business taxes makes its revenue base highly susceptible to economic downturns, with a potential recession causing a revenue shortfall of up to $59 billion over four years. To mitigate these risks, the state must prioritize building its financial reserves to avoid future tax increases or spending cuts.
Recommendations related to Business Taxes
The State should build its reserves now to counter the potential impacts of an economic downturn.
The State should prepare for the necessity of tax increases and/or spending cuts if reserves are insufficient to cover the revenue impact of a recession.
Key Data
$59 billion
— The potential revenue shortfall over four years if a recession of the size and scope of the 2009-2012 period were to repeat.
18.2 percent
— The percentage of tax revenues that could be lost over four years in a recession of the size and scope of the 2009-2012 period.
$7.7 billion
— The annual revenue impact of a decline in capital gains of the magnitude seen during the 2007-2009 period.
$74.7 billion
— The total amount of tax revenues collected by New York State in 2016.
41.5 percent
— The contribution from the top 1 percent of taxpayers to personal income tax revenues between 2002 and 2015.
$44 billion
— The average revenue shortfall over four years based on the three most recent recessions.
New York City's property tax system is characterized by complex, opaque, and inequitable assessment practices that create significant disparities in effective tax rates across different property types. To address these issues while raising $2 billion in additional revenue, the city could implement structural reforms such as eliminating assessment caps and phase-ins, or revaluing properties based on actual market sales.
Recommendations related to Business Taxes
The City should eliminate the caps and phase-in provisions for all properties to address inequities among properties.
The City should means-test property tax relief for elderly or low-income homeowners rather than using broad assessment caps.
The City should value condos and co-ops based on market values using sales prices to correct the current methodology that results in severe undervaluation.
The City should consolidate all homeowners into a single category to reduce the effective tax rate gap between homeowners and other property owners.
Key Data
$21.1 billion
— Estimated baseline property tax levy in fiscal year 2015.
$4.5 billion
— Estimated revenue foregone due to the cap and phase-in rules in fiscal year 2015.
$2 billion
— Target amount of additional revenue the proposed options are designed to raise.
$1.6 billion
— Amount of lost revenue accounted for by assessment caps applied to smaller rental properties.
$846 million
— Revenue raised in fiscal year 2015 from the revaluation of condos and co-ops and the application of a 6 percent assessment ratio.
$936 million
— Revenue raised in fiscal year 2015 from the elimination of assessment growth caps on 1-3 family homes.
The Excelsior Jobs Program, designed to replace the inefficient Empire Zones, has successfully controlled costs through stricter performance requirements and targeted tax credits. However, recent legislative modifications expanding eligibility and benefit periods threaten to increase costs, necessitating continued vigilance to prevent a return to the costly patterns of the previous program.
Recommendations related to Business Taxes
The state should avoid the temptation to loosen restrictions and performance requirements to entice more entrants to the Excelsior Jobs Program.
Empire State Development should remain cautious and vigilant in administering and monitoring the Excelsior Jobs Program.
Legislators should avoid additional modification to expand the Excelsior Jobs Program.
Key Data
$470 million
— Excelsior allocated tax credits over the lifetime of the benefit period compared to $2 billion by Empire Zones.
$2 billion
— Empire Zones allocated tax credits over the initial three years admitting new entrants.
$250 million
— Annual program cap for the Excelsior program peaking in 2015.
$478 million
— Unused credits accumulated by Empire State Development during the first four years of the program.
$239 million
— Amount of additional credits resulting from rolling over half of the unused credits.
$1.8 billion
— Potential cost of the Excelsior program by 2019 including rollover credits.
NY1 Thanks to the surge of car services like uber, fewer and fewer people are taking yellow cabs—and it's just not cabbies who are feeling the pinch. The decline has real implications for the city's transit system, which received fifty cents for every cab ride.
New York's proposed budget includes merging corporate and bank taxes, reducing the corporate tax rate to 6.5 percent, and eliminating utility surcharges to improve economic competitiveness. However, proposed property tax relief measures, which would replace $1.4 billion in local collections with state funds, are criticized for being poorly targeted and difficult to administer.
Recommendations related to Business Taxes
The state should defer action on property tax relief proposals until their design is improved and the necessary surplus is achieved.
New York should merge the bank and corporate franchise taxes to simplify the tax structure and reduce tax avoidance.
The state should reduce the corporate tax rate from 7.1 percent to 6.5 percent to generate increased economic activity.
New York should eliminate the utility surcharge immediately for industrial customers and accelerate the phase-out for all others to improve economic competitiveness.
The state should lower the top estate tax rate to 10 percent to encourage wealthy residents to remain in New York.
Key Data
20 percent
— of business tax receipts come from audits, highlighting the complexity of the current tax system.
7.1 percent to 6.5 percent
— is the proposed reduction in New York's corporate tax rate effective January 1, 2016.
$1.4 billion
— is the amount of local property tax collections that would be replaced by State tax revenue under the proposed measures.
$1 billion
— is the estimated annual statewide cost of the proposed Real Property Tax Freeze Credit.
$400 million
— is the estimated annual cost of the proposed Renter's Credit.
New York City’s commercial property tax is significantly higher than in other major U.S. cities, with the 2012 rate being 51 percent above the average for the 15 largest cities, resulting in an annual difference of $327,000 for a $25 million property. Furthermore, the city's business income taxes are nearly double the average of other large cities, and the commercial rent tax adds an additional burden that further distinguishes the city's tax environment from its competitors.
Key Data
51 percent
— New York City's commercial property tax was 51 percent higher than the average for the other 14 of the 15 largest cities, representing an annual difference of $327,000 for a $25 million property.
92.7%
— Business income taxes in New York City were 92.7 percent higher than the average for other large U.S. cities in 2004.
3.9 percent
— The effective rate of the commercial rent tax is 3.9 percent of gross rent for properties with gross rent of more than $300,000 annually.
188 percent
— A 10 percent increase in the commercial property tax would result in a tax that is 188 percent higher than in Hoboken.
New York City's property tax system is riddled with inequities, with commercial properties and large rental buildings often bearing a disproportionate tax burden compared to owner-occupied homes. To address these issues while raising $2 billion in additional revenue, the report proposes reforms such as eliminating assessment caps and phase-ins, and revaluing condos and co-ops based on actual market sales.
Recommendations related to Business Taxes
The City should eliminate the caps and phase-in provisions for all properties to address inequities among appreciating and depreciating properties.
The City should implement means-tested property tax exemptions or 'circuit breakers' for elderly or low-income homeowners to protect them from sharp tax increases instead of using broad caps.
The City should revalue condos and co-ops based on market values using sales prices to eliminate the undervaluation that currently exists.
The City should assess all homeowners at the same 6 percent assessment ratio to eliminate disparities between 1-3 family homes and condos/co-ops.
The City should eliminate the assessment growth caps on 1-3 family homes to ensure a more equitable distribution of the tax burden.
Key Data
$21.1 billion
— Estimated baseline property tax levy in fiscal year 2015.
$2 billion
— Amount of additional revenue the proposed reform options are designed to raise in fiscal year 2015.
$4.5 billion
— Estimated revenue foregone due to the cap and phase-in rules in fiscal year 2015.
$1.6 billion
— Amount of lost revenue accounted for by assessment caps applied to smaller rental properties.
$846 million
— Amount raised in fiscal year 2015 by revaluing condos and co-ops and applying a 6 percent assessment ratio.
$936 million
— Amount raised in fiscal year 2015 by eliminating assessment growth caps on 1-3 family homes.
New York State maintains $2.6 billion in business tax incentives that lack evidence of effectiveness, necessitating reforms to programs like the Investment Tax Credit and Film Tax Credit. Implementing periodic reviews and transparency requirements for these incentives would improve fiscal accountability while the state manages the repayment of deferred tax credits.
Recommendations related to Business Taxes
The Commission suggests reforms to the largest programs, specifically the Investment Tax Credit, the Film Tax Credit, and the Brownfields Tax Credit.
The Commission recommends periodic reviews of the costs and benefits of business tax incentive programs to ensure accountability.
The Commission recommends expanded transparency on which businesses benefit from tax incentive programs.
Key Data
$2.6 billion
— Amount of state tax incentives for businesses identified.
$180 million
— Annual savings from reforming the largest business tax incentive programs.
$1 billion
— Estimated cash receipt in fiscal year 2015 from deferred business tax credits.
New York should discontinue the practice of deferring $970 million in business-tax credits, as this fiscal gimmick obscures the state's structural deficit and damages business confidence. Relying on such temporary measures to balance the budget creates long-term costs and fails to address the underlying need for sustainable spending controls.
Recommendations related to Business Taxes
The state should end the deferral of $970 million in business-tax credits as it is a fiscal gimmick that masks the structural deficit and undermines confidence in state promises to businesses.
Key Data
$970 million
— The amount of business-tax credits deferred by the state, which is considered a fiscal gimmick that should be ended.
New York State should avoid using potential budget surpluses for new spending or tax cuts, as the likelihood of a surplus is low and existing fiscal gimmicks need to be addressed first. The state faces significant financial challenges, including a $2.4 billion gap for the upcoming fiscal year and a reliance on volatile revenue sources, making fiscal restraint essential.
Recommendations related to Business Taxes
Before committing to any new spending or tax reductions, New York should reduce reliance on existing gimmicks, particularly ones that add to long-term costs.
Any surprise surplus should be used in ways that help lower the gap (like paying down debt or reversing deferrals), not in ways that make the gap grow (like tax cuts or spending restorations).
Key Data
$970 million
— The amount of business tax credits deferred as a fiscal gimmick in the current-year budget.
$400 million
— The amount by which business taxes fell short of initial estimates in the previous fiscal year.
New York faces a severe fiscal crisis requiring significant spending reforms to avoid harmful tax increases that would further discourage business investment and economic activity. By reducing the proposed $5 billion in new revenue measures to $2 billion and reclassifying mis-categorized revenue hikes, the state can better manage its structural budget gaps without placing an undue burden on the economy.
Recommendations related to Business Taxes
The state should limit new revenue measures to no more than $2 billion, rather than the $5 billion proposed in the Executive Budget, to avoid discouraging investment and business growth.
Legislators should use the identified $3.1 billion in spending savings to eliminate tax increase proposals that curtail economic activity and increase the cost of doing business in New York.
The state should reclassify revenue increases mis-categorized as spending reductions—such as assessments on insurance companies—as tax increases, as these directly impact consumer and business pocketbooks.
Key Data
$5 billion
— Proposed new revenue measures in the Executive Budget
$2 billion
— Recommended cap on new revenue measures
$3.1 billion
— Total savings identified over the term of the financial plan
$1.9 billion
— Revenue increases mis-categorized as spending reductions
$679 million
— Health care savings stemming from assessments on insurance companies
$1,864.2 million
— Total mis-categorized revenues in the gap closing plan
The Empire Zone program, originally designed to stimulate economic growth in distressed areas through tax incentives, has become an ineffective, loophole-ridden vehicle for corporate tax breaks that fails to meet job creation targets. Given its history of failed reforms and lack of accountability, the program should be eliminated to preserve scarce public resources.
Recommendations related to Business Taxes
The time has come to end the program.
Increasingly scarce public resources should no longer be spent in this unproductive way.
The Empire Zone program should be a prime target for elimination.
Key Data
$582 million
— The cost of the Empire Zone program in 2008, which grew from $30 million in 2000.
$900 million
— The amount of unused tax credits firms have that can be used in future years.
$514 million
— The total amount of tax credits claimed by firms in 2006.
$391 million
— The amount of tax credits claimed by just 500 firms, representing 76 percent of the total.
$127 million
— The amount of tax credits claimed by Fortune 1000 firms in 2006.
$2.1 million
— The value of tax credits denied to seven companies after audits by the Tax and Finance Department.
New York State's high local tax burden is driven by heavy reliance on property taxes, high labor costs, and fragmented government structures, with New York City's tax burden uniquely shaped by high personal and business income taxes. To address these issues, the state should pursue structural reforms to Medicaid, pension systems, and collective bargaining frameworks, alongside consolidating local government units and school districts.
Recommendations related to Business Taxes
The state should pursue structural changes to the Medicaid program to reduce ineffective services.
The state should implement reforms in the pension benefits for public employees, such as converting to a defined contribution system.
The state should enact changes to the legal framework for collective bargaining to make the dispute resolution process more timely.
The state should pursue small school district consolidations to reduce costs.
State law could require arbitrators to award wage increases that will not necessitate tax increases or require that any wage increase be funded in part by productivity gains.
New York might benefit from using resolution processes other than the current system of arbitration, such as "last-best offer" negotiations.
The State might also benefit from consolidation in its property tax assessment units.
Key Data
$4 Billion
— Annual revenue generated by New York City's business income taxes.
$2.2 Billion
— Medicaid mandate costs required from counties (excluding New York City) in fiscal year 2005.
$4.7 Billion
— School property tax relief spending in fiscal year 2007-08, up from $600 million in fiscal year 1998-99.
$18 Billion
— Increase in district expenditures from school year 1995 to 2005.
78 percent
— Growth in New York City tax collections from fiscal year 1995 to 2005.
53 percent
— Growth in local tax collections outside New York City from fiscal year 1995 to 2005.
New York City's business tax burden is significantly higher than that of its competitors, with an effective tax rate of 7.5% compared to 4.5% elsewhere, and a property tax structure that disproportionately burdens commercial owners. To improve economic competitiveness and prepare for potential downturns, the city should establish a commission to develop a multi-year strategy for reforming the tax system and incentives.
Recommendations related to Business Taxes
The Mayor and City Council should appoint a blue-ribbon commission to map a multi-year strategy relating to the whole range of taxes and tax incentives.
The proposed commission should develop estimates of the fiscal impact in time for the mayor's January 2008 financial plan and specific recommendations for his executive budget in April 2008.
Policymakers should consider revamping business taxes while the economy is thriving and surplus revenues can ease the transition for those who will be asked to pay more.
Key Data
7.5%
— Average effective state and local tax rate on businesses in New York City.
$2.3 billion
— Annual cost to city businesses from excluded taxes like the commercial rent tax, real property transfer tax, and mortgage recording tax.
$41 per thousand
— Property tax rate paid by owners of office buildings.
$6 for each thousand dollars
— Property tax rate paid by the average homeowner.
$240 million
— Value of the deal struck with JPMorgan Chase for the construction of a new office tower.
$42 million
— Amount of corporate income tax cuts passed in Albany out of the $77 million sought by the city.
New York City imposes the highest or second-highest state and local tax burden on businesses across most industries compared to eight other locations, with combined federal, state, and local taxes reducing the rate of return on new investment by 36-50 percent. While the 2007-08 state budget changes were projected to lower the average effective tax rate in the city from 42.1 percent to 40.9 percent, the city would still retain its ranking as the highest-tax location.
Key Data
36-50 percent
— The range by which combined federal, state, and local taxes reduce the rate of return on new business investment, depending on location and industry.
42.1 percent
— The average combined federal-state-local effective tax rate for representative firms in New York City in 2006.
40.9 percent
— The projected average combined federal-state-local effective tax rate for representative firms in New York City following the 2007-08 state budget changes.
0.9 to 1.5 percentage points
— The difference in after-tax rate of return between the highest-tax and lowest-tax jurisdictions in most cases.
Economic research indicates that while high taxes can negatively impact local economic growth, the magnitude of this effect is debated and varies significantly based on the specific tax and economic context. Consequently, broad-based tax reform is recommended over discretionary tax incentives, alongside efforts to improve public service efficiency and reduce property tax differentials.
Recommendations related to Business Taxes
The city should implement broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
There is plenty of room for property tax reform, in particular, reducing differentials across property classes.
New York City must be ever more diligent in promoting agglomeration benefits through non-tax policies and providing public services efficiently.
Key Data
$8 of every $100
— New York City's local taxes absorbed nearly $8 of every $100 of taxable resources in 1997, 80 percent more than the average for the next nine largest cities.
90,000 jobs
— The 18.5 percent increase in the real property tax during 2003 was estimated to cost the city economy in excess of 90,000 jobs.
1.6 percent
— A 10 percent increase in the city's top income tax rate is estimated to result in a 1.6 percent reduction in the city's share of national employment over a three- to four-year period.
57,000 jobs
— The 10 percent increase in the city's top income tax rate suggests a potential job loss of 57,000 jobs over a three- to four-year period.
New York State faces the challenge of financing education reform while maintaining its economic competitiveness as the most heavily taxed state in the nation. Proposed solutions include eliminating system inefficiencies, expanding gambling, and broadening the tax base through measures like revising corporate income taxes to generate necessary revenue.
Recommendations related to Business Taxes
Eliminating inefficiencies in the system could generate at least $1.2 billion annually, including using teacher time more efficiently, consolidating smaller school districts, and reallocating State aid.
Expanding gambling activities could generate an additional $2 billion, which is preferable to a tax increase because it would not increase the overall tax burden.
Broadening the tax base through increased enforcement of sales tax on remote purchases, extending the sales tax to professional services, and revising the corporate income tax could raise up to $2.6 billion a year.
The State should consider realignment of state and local fiscal responsibilities, such as assuming local Medicaid or pension costs, to free up local revenues for education.
Key Data
$1.2 billion
— Estimated annual savings from eliminating inefficiencies in the education system.
$2.0 billion
— Potential revenue generated by expanding gambling activities.
$2.6 billion
— Maximum annual revenue potential from broadening the tax base, including revising the corporate income tax.
$10,665
— Average per pupil spending in New York State after adjusting for regional cost differences.
$8,041
— U.S. average per pupil spending.
$4.5 billion
— Estimated cost to New York City for its share of the statewide local Medicaid burden in fiscal year 2006.
New York State could generate additional revenue for education by broadening the corporate income tax base to include currently excluded forms of income and profits. Implementing these changes, alongside setting a higher alternative minimum tax, would help address the state's school funding requirements.
Recommendations related to Business Taxes
The state should redefine the base of the existing corporate income tax to include certain forms of income currently excluded.
The state should alter the rules for calculating taxable corporate income to include certain sales and profits that are currently excluded.
The state should set a higher alternative minimum tax for corporations.
Key Data
$320 million to $435 million
— Estimated annual revenue yield from redefining the corporate income tax base and altering rules for calculating taxable corporate income.
Small business leaders in New York City and northern New Jersey identify the overall cost of doing business, including taxes and regulations, as a primary concern that impacts their satisfaction with the region. While many firms prefer to remain in their current locations, a significant portion would consider relocating for substantial cost savings, highlighting the need for policies that mitigate adverse business costs.
Recommendations related to Business Taxes
Costs that can be controlled through government actions, such as taxes, fees, zoning rules, and utility regulations, should be given renewed attention.
A favorable business culture and public policies that encourage enterprising individuals to start businesses are critical to sustaining employment growth in the region.
Key Data
3.0
— The importance rating assigned by New York City firms to <b>government taxes and regulations</b> as a factor in business success.
3.2
— The importance rating assigned by northern New Jersey firms to <b>government taxes and regulations</b> as a factor in business success.
40.0%
— The percentage of New York City business heads who would require a <b>cost savings of 20 percent or more</b> to relocate.
39.4%
— The percentage of northern New Jersey business heads who would require a <b>cost savings of 20 percent or more</b> to relocate.
New York State must address the court-mandated need for increased school funding, estimated between $2.5 billion and $8.6 billion annually, by prioritizing internal efficiencies and statewide revenue sources over local tax increases. To achieve this, the state should implement a new accountability system, optimize existing classroom space through rezoning and year-round schedules, and restructure teacher compensation to reward performance.
Recommendations related to Business Taxes
The State should bear the full responsibility for raising sufficient new revenue to pay the incremental cost of a sound basic education.
The State should establish a longer-run goal of significantly increasing the share of all public school funds raised from statewide revenues.
The State should use educational efficiencies—such as making more efficient use of teacher time, consolidating small school districts, and reallocating State aid—to raise a significant portion of needed resources.
The State should expand gambling activities to generate about $2 billion annually, restricted to "destination" type casinos.
The State should improve enforcement of the existing sales tax on remote (including internet) transactions.
The State should restructure existing taxes (broaden sales tax base, revise corporate income tax, extend sales tax to professional services) if more revenue is needed.
The State should establish a new statewide system of accountability for schools.
The State should meet classroom space requirements through a combination of redistricting and year-round school schedules to avoid the high costs of new construction.
The State should provide financial incentives for better teacher performance and to overcome shortages in specific teaching job titles.
The State should expand the managerial discretion of principals regarding staff deployment.
Key Data
$15 billion
— Estimated one-time capital expenses needed statewide to upgrade and expand school facilities.
$8.6 billion
— High end of the range for combined annual operating and capital expenses for schools.
$1.225 billion
— Annual savings generated from within the school system through efficiencies.
New York State could generate significant revenue to fund education by broadening the sales tax base to include retail and professional services, and by reforming corporate income tax laws to close loopholes. These measures, alongside joining the Streamlined Sales Tax Project, offer concrete options for increasing state tax collections without relying solely on rate hikes.
Recommendations related to Business Taxes
The State should embrace the national Streamlined Sales Tax Project to ensure that taxes on internet and remote sales can be collected in the future.
The State should broaden the base of the sales tax to include many retail services that are not subject to tax.
The State should apply the sales tax to professional services when they are sold to consumers (not businesses).
The State should reform its corporate income tax laws to capture income on which corporations are now able to avoid paying taxes.
Key Data
$40 million to $590 million
— Potential annual yield from embracing the national Streamlined Sales Tax Project.
$950 million
— Potential additional annual revenue from broadening the sales tax base to include retail services.
$175 million to $595 million
— Potential annual revenue from applying the sales tax to professional services sold to consumers.
$320 million to $435 million
— Potential annual revenue from reforming corporate income tax laws to capture avoided taxes.
$2.3 billion
— Corporate income tax revenues paid by corporations in 2003.
$220 million
— Additional annual corporate income tax revenue generated by adopting mandatory combined reporting.
New York State and City fiscal policies in 2002 faced criticism for failing to address long-term structural imbalances and relying on political strategies rather than effective governance. While the City made efforts to reduce local tax burdens, many of these initiatives were deemed low-priority or inequitable, failing to adequately improve overall economic competitiveness.
Recommendations related to Business Taxes
State leaders should address the State's high local taxes using better programs than STAR, which fails to target reductions where they are most needed.
The City should avoid tax reduction initiatives that are low-priority or perpetuate inequitable tax policy, such as the extension of the coop and condo tax abatement.
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