On Tuesday, December 10, 2013, the New York State Tax Relief Commission (the Commission) released its Final Report (the Report). A prior announcement related to the formation of the Commission was previously covered in the Multistate Tax Update. New York Governor Andrew M. Cuomo charged the Commission, which was formed on October 2, 2013, with devising a series of targeted tax relief valued at $2 billion in three years. The Commission's purpose was to focus its efforts on alleviating the tax burden on individuals, families and businesses, emphasizing relief in the areas of local and school property taxes. New York is known for having the highest property taxes in the nation. The Commission itself recognized that New York taxpayers in 2010 “had the dubious honor of paying the highest actual tax bills in the United States.”
The Commission determined that it would be sensible to use $1 billion of the $2 billion targeted tax relief pool to reduce property taxes. The remaining $1 billion would go to businesses, families and individuals.
Under Chapter 97 of the Laws of 2011, the state established a property tax cap that affected local governments, most school districts (excepting New York City) and a number of other taxing authorities in New York. Under this law, increases in property tax levies cannot grow more than the greater of two percent or the rate of inflation during any given year. However, overrides of the cap are permitted.
The Commission’s property tax relief proposal effectively gives an incentive to such local taxing authorities to keep their property tax levies within the cap. Assuming the local taxing authority stays within the cap, taxpayers paying such “capped” property tax increase would be entitled to a rebate in the amount of the increase. This program would last for two years and would effectively freeze property taxes at 2014 levels. Because New York City is excluded from the property tax cap law, New York City is excluded from this proposal. This recommendation seems to be a departure from the status quo in New York because New York City often receives greater benefits when distinctions in benefits are made.
The Commission also proposes additional property tax relief to low- and middle-income taxpayers based on their ability to pay. The Commission did not provide any specifics in this area but stated that it is open to alternatives, e.g., providing greater benefit to those who can least afford to pay property taxes or providing a lesser benefit to a greater number of taxpayers (or some combination).
Other recommendations the Commission made include:
- Reducing the property tax burden on manufacturers. The Commission recommended a corporate and income tax credit of 20 percent of real property taxes paid by manufacturers.
- Lowering corporate income tax rates and simplifying the tax structure. The Commission recommended reducing the corporate income tax rate to 6.5 percent, the lowest corporate rate since 1968.
- Reducing the corporate income tax rate on upstate New York manufacturers to 2.5 percent (as opposed to the general 6.5 percent corporate income tax rate discussed in the previous bullet).
- Increasing the state estate tax exemption amount to $5.25 million (indexed for inflation) and lowering the applicable tax rate to 10 percent.
- Eliminating the state nuisance taxes recommended by the New York Tax Reform and Fairness Commission. This would include:
- Eliminating the tax on agricultural cooperatives
- Eliminating the stock transfer tax
- Repealing the “Add On” Minimum Tax in the Personal Income Tax (PIT)
While the recommendations contained in the Commission’s Report are not binding, it is assumed that many or most of these recommendations will be brought before the state legislature by Governor Cuomo.
Reactions to the Report have been varied. Bloomberg reported that Kathryn Wylde, President of The Partnership for New York City (a business advocacy group), praised the recommendations. Ms. Wylde had reservations about the Report’s exclusion of New York City from the property tax relief, as the city is responsible for a large share of the state’s surplus. Ms. Wylde urged state lawmakers and Governor Cuomo to ensure that New York City receives a fair share of the relief contemplated by the Commission.
Assembly Speaker Sheldon Silver was reluctant to praise the recommendations, stating that it is “important that we have the resources necessary to fund vital programs.” According to the New York Times, Mr. Silver was also concerned about the fairness of the proposals to the residents of New York City. Senate co-leaders Dean Skelos and Jeff Klein both commended the Report.