A recent tax overhaul significantly improved the business climate in the state of New York, according to experts from the Tax Foundation, a Washington DC-based think tank. New York's corporate tax system is currently ranked 25th out of 50 states in the think tank's State Business Climate Index, the think tank's annual ranking of different tax regimes. However, if the new tax system had been in place when the ranking was published, the state would have ranked 4th, a report by the Tax Foundation said.
New York's new state budget, signed into law on March 31, introduces a number of reforms in the corporate income tax and estate tax system. “While some of the targeted credits and programmes deserve criticism, the broad-based changes to the corporate tax are impressive and will greatly reduce complexities and burdens in New York’s corporate tax structure,” the Tax Foundation said in its report.
Among the changes introduced is a reduction in the number of tax bases used to calculate corporate tax, with plans to decrease the number of tax bases from four to three in 2015, with a view to eventually narrowing it to two. The state also repealed the generation-skipping transfer tax and merged bank tax system into corporate tax system. The new budget also reduced the corporate net income tax rate from 7.1% to 6.5%, putting it at its lowest level since 1968.
Joseph Henchman, the Tax Foundation's vice-president of state projects, praised New York's efforts to improve its tax regulation.“New York is not a low-tax state, and its economic success is because of strengths that overcome a challenging tax environment. High taxes need not also be complex or poorly structured taxes, however, and removing these obstacles will encourage job creation and economic activity,” Mr Henchman said.
While the new budget would have bettered New York's position in the Tax Foundation's ranking of corporate tax systems, the think tank said that the state's position in the overall tax climate ranking would have only improved by two places. New York ranked in last place in the think tank's State Business Climate Index, following the changes brought about by the new budget, the think tank said the state ranked 48th ahead of New Jersey and California.