Legislature Should Scrutinize the $23 Billion in Special Tax Breaks in the Tax Code to Obtain Additional Revenue in Budget, Brennan Says

February 1, 2010
State Assemblymember Jim Brennan (D-Bklyn) said that the Legislature should begin scrutinizing the many special tax breaks existing in the tax code for additional revenue. The State provides an annual report on the existence and value of all special preferences in the Tax Code shortly after release of the budget. The report, named “The Tax Expenditure Report,” itemizes every modification, exclusion, exemption, credit, or other special break in every part of the Code, from the corporate income tax, to the personal income tax, to the sales tax. The 2008-2009 Tax Expenditure Report disclosed that there were 392 special tax breaks in the State Tax Code worth $23.3 billion. The 2008-2009 report was the last printed version of the report.

The 2009-2010 report, which can be found on the NYS Division of the Budget’s website, showed 38 special tax breaks in the corporate franchise tax breaks worth about $3.5 billion. There are also an additional $1 billion in corporate tax breaks called “cross-article” tax breaks, meaning individuals are also separately eligible for the same tax break, for a total of $4.5 billion in annual corporate tax breaks.

Rapidly growing are tax breaks that are refundable credits in the Tax Code, such as the brownfields tax credit, the film production credit, and various empire zone credits. Companies and individuals eligible for these credits can not only avoid any tax liability but also get a cash refund from the State to offset their expenses.

“With huge cutbacks in the budget, it’s time to re-look at these special breaks,” Brennan said. He and former Senator Ray Goodman are the authors of the Tax Expenditure Report law, signed by former Governor Mario Cuomo in 1989.

“Many corporate tax breaks are designed to stimulate job creation and may have some value,” Mr. Brennan said. “They need not necessarily be repealed. They could be temporarily capped or stretched out into future years, so that the companies could offset income several years from now. The State is facing a crisis with $5 billion in cuts this year, and the loss of $5 billion in Federal stimulus funds next year if Congress does not renew the program,” he continued.