Making the Most of a Rare OpportunityOCTOBER 2006 - On January 1, 2007, New York State will welcome a new governor into office for the first time in 12 years. Although the election’s outcome is still up in the air, candidates on both sides of the aisle are campaigning on tough records of reform, and “accountability” is sure to be at the top of the new governor’s agenda, no matter which party wins the office.
This could be good news for New York CPAs. A changing of the guard and an accountability agenda could breathe new life into the state’s fiscal policies. A new set of eyes in the governor’s office could also provide the NYSSCPA with the perfect opportunity to advocate for long-overdue changes to some of New York’s most vexing tax issues. But before we do so, we must prepare.
In this regard, I am especially proud of the work being done by the Society’s New York, Multistate and Local Taxation Committee (NYMLT). The NYMLT—one of the Society’s largest and most active committees—has worked diligently to prepare for the new governor’s arrival, and recently formed a policy subcommittee to look at state and local tax issues and come up with a proactive plan. The NYMLT will be examining three policies in particular: the income, sales, and property tax, all of which will be under the microscope. Big, open questions loom large in all of these areas.
The Big Questions
The defunct “commuter tax” provides the backdrop for an important question regarding the state income tax. From 1966 to 1999, nonresidents working in New York City paid a tax of 0.45% on their earnings. But when the commuter tax was eliminated in 2000, the city lost approximately $500 million in annual revenues. Although the tax has been dead for more than five years, the question remains: Should it be reinstated?
Next, the sales tax: New York State’s sales tax rates are among the highest in the nation; 85% of the state’s population pays 8% or more in sales tax (state and local). Sales tax as a percentage of total county revenues increased from 20.4% to 25.6% from 1994 to 2004, making local governments especially vulnerable to an economic downturn. These statistics invite the question: Is New York too reliant on sales tax for revenue? If so, what should be done about it?
Last but not least, the property tax: New York State’s overall tax burden is the highest in the nation, and high local property taxes are the primary cause. The School Tax Relief (STAR) program, which exempts a certain amount of a homeowner’s property value from school property taxes, thereby reducing the overall tax bill, provides some relief. But should the STAR program be modified or scrapped entirely in favor of a new property tax relief program?
And other questions come to mind: For example, how will our new governor balance the delicate relationship between federal and state taxes? The federal alternative minimum tax (AMT) continues to apply to more and more New Yorkers each year. What impact will this ever-expanding tax have on our state in the future? In addition, New York State recently approved massive spending hikes without appropriating any new money to pay a potential $3 billion obligation to New York City schools. How will the state cover this obligation?
Please let me know what you think about these questions, or suggest other issues you think we should be exploring, at firstname.lastname@example.org. Let’s not let this rare opportunity to affect change in New York’s tax policies pass us by.