New York state is no longer dead last. The state ranked 49th in the 2015 State Business Tax Climate Index, compiled and released this week (Oct. 28) by the Tax Foundation, a nonpartisan tax policy research organization. This is one spot higher than last year’s ranking of 50th, largely due to corporate tax reforms included in the 2014-15 New York state budget.
This is the 11th edition of the State Business Tax Climate Index. The ranking is based on more than 100 tax variables in five different categories: corporate, individual income, sales, property, and unemployment insurance taxes.
According to the full report, states that rank near the top of the index, like Wyoming (#1) and Florida (#5), share in common the absence of a major tax, such as a levy on individual income. The worst ranking states like New York and New Jersey (50th) generally have more complex, non-neutral taxes with comparatively higher rates and poorly structured individual income taxes, the Tax Foundation says.
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Despite its ranking near the bottom, the report noted New York had one of the most noticeable ranking changes, with its corporate tax ranking improving from 24th to 20th. Enacted by Governor Andrew Cuomo on March 31 of this year, reforms in the new budget will lower the Empire State’s corporate-tax rate from 7.1 percent to 6.5 percent, eliminate the capital stock tax and corporate alternative minimum tax, extend net operating loss carrybacks from 2 to 3 years, and remove the carryback cap, according to the New York State Department of Taxation and Finance. Once fully implemented, New York’s overall ranking will rise to 48th, and its corporate tax ranking will jump to 4th, the Tax Foundation’s report said.
Scott Drenkard, Tax Foundation economist and manager of state projects, said the state’s corporate tax reforms are a major improvement. “While New York still has a long way to go, the recent reforms represent a concerted effort towards a simpler and smarter tax code,” he said in a news release.
The Tax Foundation awarded Governor Cuomo the “Outstanding Achievement in State Tax Reform” award this year for his work on the corporate tax reforms. The Tax Foundation says honorees are selected due to their “extraordinary efforts” to advance the cause of simpler, smarter tax policy. The organization recognized Cuomo for, “championing a comprehensive corporate tax reform bill that will transform New York’s treatment of corporate taxes from one of the worst in the country to one of the best,” according to its news release.
The budget contains the most significant reform of New York State’s corporate tax system since the 1940s, and brings the corporate tax rate to the lowest it has been since the late 1960s, the Tax Foundation said.
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