Governor Cuomo included a tax cut package in his executive budget proposal unveiled in January as a nod to struggling businesses in New York State. The package includes several components that are similar to those in the NFIB/NY Legislative Agenda — reducing the corporate franchise tax, eliminating the manufacturers’ tax and reforming the estate tax. While we take issue with the lack of broad based tax reform and the inclusion of a “circuit breaker” property tax shift, the estate tax component has the potential to be significant for small business.
Earlier this week a new report was released from the Empire Center makes the case for eliminating the “death tax.” The report reasons that the estate tax suppresses economic growth by creating a disincentive to save and invest, and it gives New Yorkers the incentive to move to avoid higher taxes. New York notably is only one of fourteen states that taxes estates, and it’s a significant consideration when small business owners and farmers are planning for the future.
Unlike many other states that have a higher threshold or those that have repealed the estate tax altogether, New York currently taxes estates valued at over $1 million. Governor Cuomo’s plan suggests a five-year phase-in to increase the threshold to $5.34 million to match the federal threshold, and he proposes lowering the state’s top rate from 16 percent to 10 percent. According to the Empire Center Report, this will reduce the number of estate filings by 90 percent.
Without these changes to the estate tax, thousands of small businesses and farmers will have a difficult time passing property to the next generation, as evidenced in the amount of vacant commercial property and farmland sold off across the state.
We were pleased to participate in a press conference with E.J. McMahon of the Empire Center and Jeff Williams of the Farm Bureau discussing this issue and the impact reforming the death tax could have for small business.