On Wednesday I had the pleasure of testifying before the State Senate on the timely topic of tax reform in New York. At this hearing, NFIB/NY recommended a ten-point plan to drastically reduce the tax burden on small business. Below is our testimony..
Good morning! First, let me thank you Senator DeFrancisco and other members of the two respective Senate Standing Committees here with us today.
My name is Mike Durant and I am the New York State Director of the National Federation of Independent Business. NFIB represents nearly 11,000 small businesses in every corner of the state, from sole proprietors to farmers, manufacturers and retailers. We have a broad spectrum of businesses within our membership and the importance of small business to our state’s economy cannot be understated. At most recent count, there are approximately 1.5 million small businesses in New York which employ more than sixty percent of New York’s private sector workforce.
Today’s hearing on tax policy reform is both timely and pertinent. NFIB regularly canvasses its members on the issues that most concern them, and taxes rightfully are a top concern. New York’s onerous tax structure has been and continues to be well documented. There are any number of annual rankings and analysis which well document that blunt picture of what ails small business in New York.
An overwhelming tax burden.
While these grim stats I am sure will be a common theme you’ll hear from today’s speakers, they are worth repeating. Consider that…
- In 2013, the Tax Foundation ranked New York 50th in Business Tax Climate
- The Tax Foundation also consistently ranks New York as having the worst state and local tax burden, most recently in 2010.
- In 2011, CNBC ranked New York as 48th in cost of doing business.
- Over the last four years, our economic outlook has also been ranked dead last in the nation. Our substantial tax burden being the prominent anchor holding back New York’s economic future.
Our tax burden is inextricably related to numerous fiscal problems our State has and continues to face. New York is a national leader in the outmigration of population which has had a crippling impact in a myriad of areas.
- Loss in political clout in Washington D.C.
- Stifled the State’s ability to generate revenue.
- And finally has led to a “brain drain” that has put our current and future workforce in peril.
These facts are not spin, they are reality.
Tax policy has the powerful ability to impact the trajectory of the economy. Simply, when you tax more of something, you get less of it. There is a reward/punishment or risk/reward balance with tax policy. The higher and more you tax individuals, statistics show there will gradually be fewer of them to tax. The same holds true for goods and services, with the effect more amplified when the factor being taxed is mobile.
The Governor, when he took office, stated that “New York has no future as the tax capital of the nation.” This recognition of the problem is the first step in any rehabilitation exercise. However, there has been little done since that fully and comprehensively addresses the problem.
Political simplicity has been trumping public policy necessity. The decade’s long theme of addressing “low hanging fruit” or implementing “quick fixes” have not worked.
Initiatives such as the recently enacted “Start-Up New York” are an acknowledgement of New York’s high tax reputation, yet are used as a strategic means to acquire new economic investment. The signature shortcoming of this policy initiative is that it fails to address the considerable weight of our tax burden on existing taxpayers and small business owners.
Which is why we are…hopefully here today.
Today, NFIB has put forth a comprehensive tax reform agenda as accompaniment to this testimony. While the cost savings of this plan for small business are still being calculated, these ideas are a starting point for real dialogue on substantive tax reform.
The focus of our agenda and testimony today is on those small businesses with net incomes of less than $500,000 annually. This distinct approach is targeting those true small businesses and captures the overwhelming majority of our membership.
Additionally, it is imperative for lawmakers and the administration to include personal income tax reductions with corporate income tax reductions. A majority of small businesses are set up as “pass-through” entities. This means that many small business owners pay their business taxes through their personal income tax. A corporate only approach to tax reform would only put more of the tax burden on the shoulders of small business owners.
Our reform proposal includes –
- The use of regional and local economic factors in the sales tax assessment process.
- A three-tiered corporate tax cut for small businesses with an Entire Net Income of less than $500,000.
- A personal income tax cut for small business with an Entire Net Income of less than $300,000 with a more modest cut for those between $300,000 and $450,000.
- We also recommend an immediate repeal of the 18a assessment, tax cuts for small manufacturers and another reform of the MTA payroll tax.
Addressing our current tax issues is equally as important as putting forth best legislative practices moving forward. To that end we are pushing for two initiatives which would help promote a more balanced tax policy moving forward.
This proposal would require fiscal notes on any legislation that would financially impact small business and taxpayers, and we recommend a “super-majority” to approve any future tax increase.
Further, we must both acknowledge the integral role our family farms play in New York’s present and future economy and address the threats they face. Agriculture contributes billions to the state’s economy and currently 23% of the state’s land area is used by farmers. Without a cap on the annual percent increase for agriculture assessments, many family farms will be forced to sell their land, permanently altering this valuable and necessary component of New York’s economy. Currently, legislation capping the agriculture assessment is pending the Governor’s signature and NFIB strongly urges he sign this cap into law. Absent the Governor’s approval, there must continue to be a dialogue and effort to reduce the fiscal property tax burden on our family farms.
Lastly, any discussion on comprehensive tax reform must include mandate relief and property taxes. NFIB strongly supported and advocated for the property tax cap. Thank you all for your leadership on that issue. Now we must continue to reduce our property tax burden by working for more mandate relief. It has been well document that our schools and communities remain in fiscal peril and it is unquestionable that more work needs to be done. Let’s work together toward providing more fiscal flexibility for our schools and communities.
New York will never be truly receptive to new economic investment if our tax policy is not broadly and dramatically overhauled. New York will never be a truly attractive destination to invest or live unless our tax burden decreases.
Our proposal submitted today is narrow in focus, yet comprehensive in impact. Ronald Reagan once said that “great change in America begins at the dinner table”. I think great change in New York can come from collaboration and public dialogue like we are having today.
But only if this exercise leads to more discussions.
And only if those discussions turn into action.
The Governor has and continues to acknowledge taxes are a deterrent to a revitalization of our economy. Lawmakers on both sides of the aisle, in both houses of the legislature, have continued to highlight the importance of small business in both the current and future state economy. There is not anything that we have submitted to you today that is easy. I am sure there is not a reform idea submitted by any organization today that is politically simplistic.
But the stats are there.
The facts are there.
And the acknowledgement is there.
Now we need to collaboratively work together to put in place the tax reform needed for small business, taxpayers and New York’s economic future.
Thank you for your time today.