Tax Justice Digest stories about New York

New York is no different than most states in at least one respect – it too must confront a major budget deficit, estimated at $4.7 billion for the fiscal year starting April 1.  It may, however, follow a much more responsible path than Georgia and other states attempting to cut taxes in the midst of dire financial straits.  The state Assembly has approved a plan that would levy a temporary income tax surcharge on people with incomes over $1 million and that would yield roughly $1.5 billion per year.  The plan is opposed by the Senate, but new Governor David Paterson has yet to rule it out.

Maryland faces a situation similar to New York and is also considering an increase in personal income taxes for some of its wealthiest residents. But rather than devote that additional revenue to current appropriations, lawmakers want to use it to repeal a change in tax policy that isn’t scheduled to take effect until this summer.  Recent tax projections in the Free State are now $333 million lower than previously expected and, just this past week, the Maryland House adopted a FY 2009 budget that reduces spending $250 million below Governor Martin O’Malley’s initial request. 

Yet, one topic that continues to dominate conversations in Annapolis is the extension of the state’s sales tax to computer services.  Enacted as part of a larger tax package during last fall’s special session, the tax change isn’t slated to take effect until July 1, but is the target of a major lobbying campaign by the computer industry.  The Governor recently threw his weight behind a Senate plan to repeal the computer tax and replace the lost revenue with an increase in the personal income tax:  specifically, the creation of two new tax brackets with rates of 6.0 percent and 6.5 percent for taxable income above $750,000 and $1 million respectively.  Such a move would improve the progressivity of Maryland’s tax system, but could be a step back for sustainability. Maryland – like most states – needs to expand its sales tax base to include more services or be left with a tax system that is poorly matched to today’s economy.

State corporate income tax reform is gathering momentum in 2007, as more and more states are considering adopting an important corporate tax reform: combined reporting. Governors in New York, Iowa and Pennsylvania have already proposed this important loophole-closing reform, and newly elected Massachusetts Governor Deval Patrick is sending signals that he may follow in their footsteps. Meanwhile, a new paper by the Center on Budget and Policy Priorities' Michael Mazerov gives the lowdown on an equally important corporate tax reform that could productively be adopted by every state with a corporate tax: company-specific disclosure of taxes paid (or not paid). Mazerov's paper includes model legislation for use in any state seeking to shed more light on corporate tax avoidance.

Counties in New York, as in many states, often provide tax-breaks to businesses through Industrial Development Agencies (IDAs). The IDAs were originally created to stop companies from relocating to states with lower wages and benefits. However, a recent study by the New York Comptroller’s office has found that companies receiving tax incentives rarely create the promised number of jobs. In fact, two-thirds of all companies show either stagnant or declining employment numbers. The Comptroller’s report has received wide media attention and it seems likely that some reforms will be forthcoming.

ITEP Report: Achievng Adequacy - Tax Options for New York in the Wake of the CFE Case

This report offers citizens, activists and policymakers a detailed primer on New York's tax system. The report assesses the state's personal and corporate income taxes, property taxes, and sales and excise taxes, with an eye toward evaluating options for revenue-raising tax reform that may help lawmakers comply with the New York Court of Appeals' June 2003 decision requiring the state to raise additional revenues for education.