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Taxing News?

A report issued by Gov. Andrew Cuomo’s tax commission has a lot to say—but will the proposals get adopted, and should they?

by Erin Pihlaja on December 12, 2013

On Tuesday (Dec. 10), a state tax commission appointed by Gov. Andrew Cuomo released a report outlining recommendations for ways to provide relief to homeowners and business by reducing property and business taxes in the state.

The commission was co-chaired by former Gov. George Pataki and H.Carl McCall, chairman of the State University of New York Board of Trustees and former state comptroller.

The recommendations included the elimination of an energy tax placed on utilities, cutting the estate tax by 6 percent but increasing the size of the taxable estate from $1 million to $5 million, and reducing the corporate franchise tax from 7.2 to 6.5 percent.

But the biggest news that came of the report was the idea of a two-year property tax “freeze” that would rely on the ability of local governments to reduce their spending to stay under the tax cap, and a tax credit for low-income homeowners with high property-tax bills.

In a press release from the governor’s office, Chairman McCall said: “This report shows once again what is possible when partisan differences are put aside for the good of the people. The members of the panel embraced the Governor’s charge and his cooperative approach to come up with bold recommendations made possible by three years of fiscally sound budgeting that has yielded a two billion dollar surplus. The old Albany would have spent this money, but under Governor Cuomo’s leadership, we will be giving it back where it belongs—in the pocket of tax payers.”

For the first year of the freeze, municipalities that stayed under the tax cap would receive a state credit for the growth of property taxes that affected eligible homeowners. The freeze would continue for year two, for those who qualified in areas that kept their spending down.

The news was met with mixed reviews. Those who embraced the commission’s findings touted the economic benefits of the proposed measures.

Democratic New York state Sen. Cecila Tkaczyk released a statement: “Governor Cuomo’s tax commission has offered recommendations that will help lower the state’s crushing tax burden on residents and small businesses.Implementing a property tax circuit breaker would provide much needed relief for our communities and putting an end to the 18-a energy tax would help us revive local economies and create new jobs. I applaud the commission for its recommendations and I will continue my work to reduce the tax burden on New York’s families and businesses.”

The property-tax circuit breaker is a term to describe tax relief that is designed to shut down something, in this case tax burden, when the system experiences an overload. The surge here would be that too much of an individual’s income is flowing towards property taxes, the relief would stop the flow so the user is not overwhelmed.

But some don’t agree with its effectiveness. Mike Durant, state director for the National Federation of Independent Business, said that the organization endorsed the recommendations regarding the estate and corporate tax, as well cutting taxes for manufacturers, but that the recommendations did not go far enough.

“We wholeheartedly agree that property taxes are a problem even with the tax cap in place,” he said. “The circuit breaker does nothing to relieve the burden, it just shifts the burden. We’ve got schools and municipalities in trouble. . . . We’d like state mandate relief.”

Beyond that, Durant agreed with Pataki’s recommendation to reduce the personal income tax. In a released statement he said, “We urge caution in implementing this recommendation into the Governor’s budget proposal and would strongly advocate that these funds be better utilized in the form of further personal income tax cuts that would specifically reduce costs for an overwhelming majority of small businesses.”

Durant said that an adjustment to the personal income tax would have even broader economic benefits for communities, especially on the ground level. “Many small businesses file their state taxes through their personal income taxes,” he added via phone interview. “Relief of the personal income tax would more broadly capture the majority of small businesses.”