Senator Lee Zeldin and Assemblyman Dean Murray have introduced a bill that would fully repeal the MTA payroll tax for areas outside of NYC. According to an article on NewsLI.com:

“New York State Senator Lee M. Zeldin (R, C, I- Shirley) and New York State Assemblyman Dean Murray (R, C- East Patchogue) today joined local elected officials to announce the introduction of State Legislation to fully repeal the MTA Payroll Tax for all counties, towns and villages outside of New York City.

Senators Zeldin and Jack Martins (R, C- Mineola), and Assemblyman Murray, since taking office last year, have been committed to eliminating the MTA Payroll Tax that was enacted in 2009. In June 2011, the State Senate passed Senator Zeldin’s legislation to completely phase out the MTA Tax for all employers in Nassau and Suffolk Counties, as well as other locations throughout the 12 county MTA Region. Unfortunately, the legislation was never taken up for a vote in the State Assembly despite bi-partisan sponsorship.

Together with many of their Senate and Assembly colleagues, the ongoing effort has started to yield substantial results. This past December, Governor Andrew Cuomo signed legislation that repealed the MTA Payroll Tax for small businesses and other entities, with payrolls under $1.25 million, many self-employed business owners, as well as all private and public schools. That’s over 700,000 taxpayers who were previously paying it. Approximately 80% of all employers received a total elimination. Thousands of others received a reduction. However, many counties, including Nassau and Suffolk, as well as towns and villages, like Islip and Brookhaven, with payrolls over that threshold, are still paying the tax.”

To read more click here.

A coalition of labor unions, religious groups, and others is urging Governor Cuomo and the legislature to close what they say are loopholes in the law. As Karen DeWitt reports - “They say those loopholes are shielding large corporations from having to pay their fair share of taxes…

But the leader of the state’s Business Council, Heather Briccetti, says now is not the right time to be raising taxes on corporations. She says a recent survey found New York 49th in the nation for having a hospitable tax climate for business.

“In terms of our competitiveness, I think it’s a very hard argument to make that we’re letting businesses escape without paying their fair share of taxes,” Briccetti said.

And, she says the charge that corporations in New York aren’t paying enough taxes is ludicrous. She points to revenues from the financial industry, which account for 20% of all taxes collected in New York.

Briccetti says there’s another reason why some corporations have been paying lower taxes lately. In the recession and it’s aftermath, they aren’t making much money.”

To read the rest of the story or listen to the interview click here.

An editorial in the Jamestown Post-Journal points to the analysis done by the State Comptroller’s office on how local governments and school districts are dealing the 2% tax cap as they put their budgets together.

“More than 70 percent of local governments reviewed by auditors had adopted budgets with a property tax levy that was within the allowable limit, while 5 percent exceeded the cap inappropriately, according to an analysis by New York State Comptroller Thomas P. DiNapoli’s office.

In the last few weeks DiNapoli sent more than 200 auditors across the state to review the new budgets of 798 municipalities.

“My auditors will be visiting the municipalities that exceeded their tax cap improperly to make sure they have taken corrective action and reduced their tax bills or put any excess property tax revenue into a reserve as required by the law,” DiNapoli said. “Our review assisted local governments by providing insight into common issues and errors calculating the new tax cap, and I have directed my staff to develop additional training and expand our outreach to eliminate these errors.”

To read more click here.

The following in an editorial by New York State Senator Mike Nozzolio, which appeared in the Ithaca Journal:

“This year, the new leadership we built in the state Senate, in close partnership with Gov. Andrew Cuomo, took strong and decisive action to change the direction of our state. We eliminated a $10 billion deficit, brought state spending under control and capped property taxes for the first time in our state’s history.

As we look forward to a new year, it is important that we build on this success and take the next steps to cut taxes and create jobs.

That is why I am pleased to announce that my Senate colleagues and I have again partnered with the governor to enact a new plan that will cut taxes for millions of New Yorkers, create thousands of new private sector jobs and continue to turn our economy around. This middle-class tax cut and job creation plan will provide $690 million in personal income tax relief to hardworking taxpayers, families and job- creating local businesses.

This measure, which will set the lowest tax rate in more than 50 years for the vast majority of New Yorkers, has been strongly supported by pro-taxpayers, pro-jobs organizations across the state. Here is what important job creators are saying…

…’Restructuring the current income tax brackets will help ease the financial burden on hardworking taxpayers and business owners, which is vital to growing New York’s economy.’ (The Business Council of New York)”

To read more click here.

According to an op-ed in the NY Post:

“Albany pols may be about to play Scrooge with New Yorkers’ electric bills: They’re lining up with greenie activists and opportunistic labor unions to hike them by five bucks a month — or more.

State legislation would force utilities like Con Edison to distribute an increasing share of juice from solar-power suppliers.

Sponsors call it a “jobs bill” — but wallet-shredder would be more apt: Con Ed would have to spend as much as 10 times market rates to buy the boutique power.

Make no mistake: This is a $325 million-a-year tax on utilities, which will pass it along to ratepayers — in the form of a $5 hike in monthly bills.

The Business Council of New York figures it will cost more than $40 billion over 30 years. That’s a back-breaking levy on utilities — or, rather, average New Yorkers.”

To read more click here.

In Nassau County, Governor Signs Legislation to Cut Taxes For More Than 700,000 Small Businesses and Self-Employed New Yorkers

The following is part of a release issued today by Governor Cuomo’s office.

“Governor Andrew M. Cuomo today traveled to West Hempstead, Nassau County, to sign a new law that will reduce the MTA payroll tax, providing relief for more than 290,000 small businesses and more than 410,000 self-employed New Yorkers. The tax reduction is part of the Governor’s comprehensive plan, passed by the legislature last week, to create jobs and cut taxes for middle class New Yorkers, and revitalize the state’s economy.

“Small businesses are New York’s growth engine and this tax reduction will help create jobs and get our state’s economy back on track without jeopardizing funding for the MTA,” Governor Cuomo said. “I thank the leadership as well as the members of the legislature for their dedication in seeing the MTA tax reduced and working to get our economy moving again.”

On December 7, the state legislature passed the Governor’s Middle Class Tax Cut and Job Creation legislation that reduces the MTA payroll tax on small businesses while maintaining the necessary funding for the MTA from other sources. The tax will be eliminated for 289,000 small businesses, defined as those having an annual payroll between $10,000 and $1.25 million, in the MTA region. Additionally, more than 6,000 businesses with payrolls between $1.25 and $1.75 million will see their payroll tax cut by either one third or two-thirds. The MTA payroll tax cut will also benefit approximately 414,000 self-employed taxpayers. All elementary and secondary schools, public or private, are exempt from the payroll tax under the new law. The new law has no impact on MTA funding as the state will compensate the MTA for all revenue lost by the tax cut.

Senate Majority Leader Dean G. Skelos said, “The MTA payroll tax has been an enormous burden on businesses and today we are lifting that burden. More than 290,000 small businesses will now have a greater opportunity to invest in their businesses and invest in creating new jobs. I want to thank the members of the Senate Republican Conference, especially Senator Lee Zeldin, for keeping up the pressure to repeal this job-killing tax; and I thank Governor Cuomo for his leadership and for signing this measure into law.”

Senator Lee Zeldin said, “I want to thank Governor Cuomo and my legislative colleagues for their partnership to help begin repealing the job-killing MTA Payroll Tax. The MTA Payroll Tax has been damaging our economy and restricting the growth of quality jobs in New York. Repealing this tax for all small businesses and schools, and reducing the rate for others, spurs real economic development, and helps put New York State on the path towards prosperity.”

Deputy Speaker Earlene Hooper said, “Reducing the MTA payroll tax is a major win for commuters, small businesses and other taxpayers here in Nassau County. I thank Governor Cuomo for his leadership in protecting the taxpayers and creating jobs across New York State. By working together and putting politics aside, he has shown that government can work for all of the people.”

To read more click here.

In an article posted on wntpapers.com J. Maloni writes - “State Sen. Mark Grisanti Thursday announced his endorsement of Gov. Andrew Cuomo’s plan to overhaul state income tax rates as a means toward middle class tax relief.

“I commend the governor and Senate leadership for this groundbreaking initiative,” Grisanti said. “I stand proudly with the Business Council of New York State and the National Federation of Independent Business in support of this measure.”

Grisanti represents Grand Island in the State Senate. “My constituents need this significant tax relief today, right now, ASAP - and they don’t have time for partisan bickering,” he said.

“The overwhelming majority of my constituents will see their first tax cut in decades because of this overhaul,” Grisanti said. “This legislation cuts taxes for 4.4 million middle-class taxpayers who will receive $690 million in tax relief - that is hundreds of dollars for hard-working Western New York families who are having a tough time making ends meet. This money is better off in citizens hands helping stimulate the economy than in government coffers.”

To read more click here.

Citizens for Tax Justice Report Misleads Policymakers and the Public

Citizens for Tax Justice (CTJ), in conjunction with its sister organization, the Institute on Taxation and Economic Policy (ITEP), on December 7 released a report claiming that 265 of America’s largest and most profitable corporations “…avoided a total of $42.7 billion in state corporate income taxes over the three years [2008-2010].” [“Corporate Tax Dodging in the Fifty States, 2008-2010”] The study, which focuses exclusively on state and local corporate income taxes, is deeply flawed and distorts the state corporate income tax system. Moreover, it misleads policymakers and the public regarding the true composition of business tax payments to state and local governments. It is unfortunate that the report, purportedly a comprehensive research paper, is so overtly political in its scope and message.

What the Authors Deliberately Left Out:

As is the case with any study, readers should ask themselves what the study excludes. In the case of the CTJ study, the answer to this question is enlightening:

The CTJ study looks at only state and local corporate income taxes. The study does not include franchise, net worth, capital stock, gross receipts, excise or other similar business taxes. Perhaps more importantly, the study also excludes all property taxes, sales taxes, and payroll taxes paid by companies during those three years.

In FY 2010, businesses paid $619 billion in total state and local taxes. Of that amount, total state and local corporate income taxes were $44.1 billion. Thus, the taxes CTJ chose not to mention are 14 times larger than the taxes CTJ chose to include in the study. In other words, the CTJ study covers only about 7% of total state and local business taxes.[1]
CTJ Assumes Status of Benevolent Dictator

To reach its conclusions, CTJ ignores laws enacted by democratically elected legislators. For CTJ, a company whose effective tax rate is lower than the top statutory rate is somehow “avoiding” taxes. CTJ conveniently leaves out of the study those deductions and credits that legitimate tax policy experts would not question, such as the deduction for net operating losses. If CTJ had conducted a similar analysis on individual income taxes, it would ignore child care credits, personal exemptions, the home mortgage interest deduction and a myriad of other deductions and credits. It would then claim that individuals who claim these deductions and credits were somehow “avoiding” taxes they should have been paying.

CTJ Apparently Unconcerned with Economic Development

Economic development is discussed only as a negative in the CTJ study. The study bemoans “elected officials who find it difficult to resist entreaties from corporations for tax breaks.” This negative impression of economic development demonstrates a serious disconnect between CTJ and the overwhelming majority of state policymakers. Most of those policymakers make informed decisions to willingly trade lower corporate income tax collections for job and investment growth, which in turn drives other state and local tax revenues. As noted above, state revenues derived from non-income-based business taxes dwarf state corporate income tax collections.

CTJ Distorts the Details

The CTJ’s three-year study of specific corporations is framed by the assertion that state corporate income taxes have long been declining due to three “broad causes:” 1) federal corporate tax cuts; 2) “ill-advised” tax incentives; and 3) “tax shelters created by corporations armed with creative accounting staffs.” The study counts on the fact that the public is unaware of the complexities of the state corporate income tax system and the information available from company financial reports. The following are but a few of the ways in which CTJ plays on public ignorance to distort the facts.

The study ignores perhaps the greatest reason for the decline in state corporate income taxes – the tremendous growth in the use of limited liability companies and other pass-through entities. Most states did not recognize LLCs until the mid-90s. Since then, their use has grown exponentially.[2] Tax revenues from businesses operating as LLCs are reflected in increased personal income tax revenues.

The study purports to include only companies with earnings over the three-year period, but the authors admit they have manipulated those audited book earnings to adjust for accounting methods the authors disagree with – despite the fact that companies are required to follow such accounting methods under Generally Accepted Accounting Principles (GAAP). These adjustments, by their very nature, will always increase the book income measure.

The study admits to making the false assumption that the company’s annual report information on state taxes equals the state income taxes actually “paid” in any given state or even in total for that year. The financial provision for state tax expense, under GAAP, includes the results of prior year audit settlements occurring in the current year, other deferred tax expenses, and any other items from prior years that impact the current financial statement. Accordingly, comparing the state income tax provision on the financial statements to a percentage of “U.S. Profits” as determined by the authors is a comparison of apples and oranges.

The CTJ authors ignore the impact of net operating loss (NOL) carryovers. When a corporation incurs a loss, state and federal tax laws allow that company to offset that loss against future (and past) earnings. NOL provisions are designed to avoid penalizing companies for the artificial difference between the annual tax reporting cycle and the normal business cycle. Thus a significant loss in one year can impact the amount of tax a company pays in both prior and subsequent years.

The three years covered by the study happen to coincide with the worst recession the nation has suffered since World War II. One would expect the corporate income tax to behave precisely as designed during periods of economic downturn – if income is down, so are income taxes. Not coincidentally, the last time CTJ issued a similar report was in 2005, addressing the years 2001-2003, precisely matching our nation’s previous recession.

The study, astonishingly, recommends mandatory worldwide combined reporting – a reporting methodology that was thoroughly discredited in the 1990s when our foreign trading partners threatened retaliatory taxation against the USA for states’ use of the methodology. No states currently impose mandatory worldwide combined reporting against general businesses.

The study’s findings are skewed by the fact that seven states – Michigan, Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming – did not impose a state corporate income tax during the years in question. However, four of those states – Ohio, Michigan, Texas and Washington, imposed a version of a gross receipts tax that was, in effect, a stand-in for a state corporate income tax. None of the revenues collected under those taxes are considered under the study. Further, even among states with a corporate income tax, such taxes are imposed on vastly different entity and income bases. Thus, to extrapolate an “average” tax rate from an aggregate number in company financial reports is meaningless.

The report recommends several “tools” to close what the authors perceive to be “corporate loopholes” in the state corporate income tax — including combined reporting and throwback of sales receipts in the apportionment formula – but fails to note that states have been addressing these issues for decades. The report fails to mention that the majority of states without combined reporting have enacted “addback statutes” that effectively prevent income shifting between corporate entities. The report also fails to note that among the states that levy a corporate income tax, more than half have adopted a throwback rule as a way to reach across state lines to tax revenues not taxed by other states. Despite its use, the throwback rule has been derided by leading public policy economists as a policy that taxes the wrong income, by the wrong state, at the wrong rate. [3]
Conclusion

CTJ’s exclusive focus on state corporate income taxes is likely to resonate with uninformed readers, particularly individuals whose primary contact with our federal tax system is through the personal income tax. The informed reader, however, should understand that the study ignores over-taxation at the state and local level of many businesses through income and non-income taxes.

These non-income taxes are more than 14 times greater than the state corporate net income tax, and must be included in any responsible and serious discussion of state business tax burdens. CTJ’s proposals to collect more corporate income taxes are decades old and have been duly considered, and in many cases rejected, by legislatures in many states. Most legislators, unlike CTJ, are more concerned with job and investment growth than adopting policies that would make their states less competitive in our global economy.

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Questions regarding this Legislative Alert should be directed to Doug Lindholm at 202/484-5212.

Rick Karlin of the Times Union writes:

“The day after its unveiling, state lawmakers on Wednesday approved an overhaul of the state’s income tax brackets in a way that provides a modest measure of middle-class relief, but increases rates for the state’s wealthiest residents.

“This is the best path for this state at this time,” Gov. Andrew Cuomo said after the Senate passed the measure 55-0; the Assembly passed it later in the evening. “The more you make the higher rate you pay. That I believe is fair.”

The package, with middle-class tax cuts but higher rates for those earning more than $2 million a year, was brought forward after Cuomo, Assembly Speaker Sheldon Silver and Senate Republican Leader Dean Skelos hammered it out in classic three-men-in-a-room fashion.

And while it raises less money than some would like, the measure included elements that offered something for everyone — so much so that even the most conservative lawmakers heaped on the praise.”

To read more click here.

Adam Sichko of the Business Review writes (subscription-based) - “Business lobbies are lauding an announced deal for new tax rates in New York and increased aid to businesses.

Legislators are expected to vote on the deal later this week, and it has the approval of both Assembly Speaker Sheldon Silver (D-Manhattan) and Senate Majority Leader Dean Skelos (R-Long Island). Gov. Andrew Cuomo announced the deal Tuesday…

Finally, tax returns reporting more than $2 million of income will be taxed at 8.82 percent, just less than what they were under the millionaires tax. Still, the rate is two percentage points higher than if these changes did not exist.
“Don’t lose the context. The context is the massive pressure that existed to extend the (millionaires) surcharge to everyone, across the board. I’m relieved that conversation is over,” said Heather Briccetti. She is acting head of The Business Council of New York State Inc., a lobby with 2,500 members based in Albany.

The lobby’s board consists of executives from many major corporations around the state.
“Small businesses will get relief here,” Briccetti said. “This deal offers a lot of reasons for people to be optimistic. I honestly don’t think there’s anything in there I can really be critical of.”

To read more from the Business Review click here.