By Assemblywoman Nancy Calhoun
The 2011 Tax Foundation rankings for business tax climate place New York dead last. The Empire State’s steady pattern of decline jeopardizes economic growth, job creation, and the overall well-being of our state. The Tax Foundation attributes New York’s last-place rating to “having the third worst individual income tax, ninth worst sales tax, and the worst property tax.”
The importance of this ranking cannot be understated. In the current economic climate, companies are looking for every opportunity to compete successfully, including a favorable business tax climate. New York’s tax policy is a debilitating disadvantage in the race to attract new businesses, investments, and jobs.
In order to identify the issues at the root of the state’s detrimental tax system, it is helpful to first understand how the Tax Foundation computes its rankings. States are ranked across five areas: major business taxes, sales taxes, individual income taxes, unemployment insurance taxes and property taxes. The rankings favor states that utilize low-rate and flat taxes. The simpler, more universally applied a tax system, the better a state will rank. New York’s system does not adhere to any of the core principles that the Tax Foundation considers positive qualities.
New York’s income tax system imposes a high top rate (8.97%, dubbed the “millionaire’s tax”) and relies on a narrow tax base of high income earners. So, instead of a flat and universal structure, New York’s system is progressive and narrowly applied. This type of system creates disincentives to earning.
This is all on top of the state’s devastatingly high property taxes. Upstate New York and Long Island feel the squeeze from property taxes more than any other region of the state. New York State has the highest combined property taxes in the country. Outside of New York City, New Yorkers pay an average of $54 out of every $1,000 in income to property taxes, 54% above the national average.
Along with high property taxes, New Yorkers are also burdened with some of the nation’s worst sales taxes and unemployment insurance taxes. The state’s unemployment insurance taxes are among the worst, putting a direct strain on the finances of businesses.
The effect of all of these taxes goes far beyond a ranking. These wrongs need to be righted in order to make New York competitive. The implementation of a property tax tap is a good first step.
This ranking is a warning flag that changes are necessary. If meaningful changes are not made soon, the economic well-being of New York is at risk. I am hopeful that together we can make the critical changes needed to ensure a bright and prosperous future.