Schimminger Hails Business Tax Cuts in New State Budget
A $165 million package of business and income tax cuts, including a significant change in corporate taxes benefiting manufacturers and other key industries, has been included in the final 2005-06 state budget bills passed by the State Legislature today, announced Assemblyman Robin Schimminger, chairman of the Assembly Committee on Economic Development, Job Creation, Commerce and Industry.
"Having sponsored legislation to adopt the ‘single-sales factor’ corporate tax reform, I’m particularly pleased that we’ve been able to remove a disincentive to investment in New York," said Schimminger. "When fully implemented, tax liability will be reduced by some $240 million for more than 11,000 in-state businesses, and will be of particular benefit to the manufacturing sector."
Schimminger explained that state corporate franchise taxes are currently based on three factors: in-state sales, payroll and property. "Consequently, state taxes increase as in-state jobs and facilities grow, effectively encouraging companies to locate jobs and plants elsewhere. The single-sales factor reform will base taxes on just one factor, in-state sales. This change will be phased in over three years, and will be 60 percent effective in 2006, 80 percent effective in 2007 and fully effective in 2008," he said.
"We also are reducing the special corporate franchise tax rate on small incorporated businesses from 6.85 percent to 6.5 percent and are raising the earned net income limit subject to this special rate from $200,000 to $290,000 to increase the number of small businesses that will qualify for this new low rate," said Schimminger. "Our actions will save these entrepreneurs $5 million annually." Currently, small businesses with earned net income (ENI) below $200,000 are subject to the 6.85 percent rate, while ENI above that level is taxed at a rate of 7.5 percent.
In addition, the tax cut package doubles the technology investment tax credit available through the Certified Capital Company (CAPCO) program, creates new R&D credits for companies commercializing high tech and life sciences products, and extends green building tax credits for another five years. Calls to extend temporary surcharges on the personal income tax and sales and use tax, set to expire in the 2005-06 fiscal year, were rejected by the Legislature, as was the Governor’s proposal to increase the wine excise tax by over 400 percent.
"The tax reductions for businesses in this budget will help to improve New York State’s tax and jobs climate," concluded Schimminger.