Tax Credits Have Tripled Over Three Years

Tax breaks in NY triple over six years

Joseph Specter

Democrat and Chronicle

December 9, 2013

In 2005, New York had 33 business-tax credits costing taxpayers $673 million. This year, it’s 50 different credits worth $1.7 billion — almost triple what it was just six years ago, an independent report found.

As New York seeks to regain its economic footing, its reliance on credits to offset its high taxes has come at a growing expense to taxpayers, critics say.

It’s also created haves and have nots: A small percentage of businesses are getting the bulk of the breaks, a report prepared last month for the state Tax Reform and Fairness Commission found.

“I think it demonstrates the attractiveness to elected officials of spending money through the tax code that you don’t need to appropriate every single year. They are easy to adopt,” said Donald Boyd, a senior fellow at the Rockefeller Institute in Albany and one of the report’s authors.

The critical report was not part of the commission’s findings last month. The commission was formed by Gov. Andrew Cuomo to look at ways to improve New York’s tax code. Capital New York, a news website, posted it online.

The report comes at a key time in New York. Cuomo, lawmakers and special-interest groups are grappling with how to curb New York’s high taxes.

Cuomo has hinted that he will propose property-tax relief for homeowners next year, perhaps through tying taxes to household income. The so-called circuit breaker program has come with a price tag of $1 billion to $2 billion a year.

Unions and liberal groups support the measure.

“New York state needs a middle class circuit breaker,” New Yorkers for Fiscal Fairness, a union-backed group, said in a statement Wednesday. “In 2011, an estimated one-third of all households in New York with incomes of $100,000 or less paid 10 percent or more of their income in property taxes.”

Earlier this year, Cuomo and lawmakers agreed to give middle-class homeowners a $350 rebate check next October. And New York already has a $3.5 billion a year STAR program, which provides on average an annual $700 credit on a homeowner’s school-tax bill.

Cuomo and legislators are up for election next November.

Fiscal conservatives on Wednesday urged Cuomo to pursue cuts to the state’s income-tax rates for high earners and make permanent income-tax cuts for the middle class.

Cuomo and lawmakers agreed in 2011 to lower income-tax rates on the middle class, but to keep higher rates on the wealthy. This year, the rates were extended through 2017.

Lowering the rates on the wealthy would help small-business owners who are often hit by high income taxes through their companies, according to a joint statement from the Tax Foundation in Washington, D.C., and the Empire Center for Public Policy in Albany.

In October, the Tax Foundation ranked New York as the worst business climate in the nation.

“Any new form of state-subsidized ‘property-tax relief’ would not constitute a net tax reduction, but would merely shift a portion of the burden from local property owners to state taxpayers,” the groups said.

Unions have also derided the tax breaks given to businesses, saying the money should go to help the working poor and fund local services.

State and local governments provide about $7 billion a year in tax breaks to businesses in New York, reports have found.

“Tax breaks alone are not an economic-development policy,” Mario Cilento, president of the state AFL-CIO said in a statement. “We need to invest in New Yorkers and the services they rely on and create new ladders to the middle class.”

Cuomo has sought to limit taxes by instituting a property-tax cap in 2011 and this year implementing tax-free zones for businesses that locate near college campuses, mainly upstate.

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