GNYADA December 2013 Newsletter

Gov Cuomo’s Tax Reform Commission Issues Report

10

A recent report by a national “tax watch” group put New York dead last among states when comparing the complexity of tax codes and tax rates. The National Tax Foundation ranked New York 50th overall, just behind New Jersey and California. New York's individual income tax ranking was 49th. As reported above, Gov. Cuomo has established tax commissions that will recommend ways to simplify the tax law and cut taxes. Cuomo and the legislature have extended an income tax surcharge on top earners and a Gov. Andrew Cuomo’s Tax Reform and Fairness Commission, empaneled to make the state’s tax laws “simpler and fairer,” has recently presented its Report. It has proposed a number of reforms that, if adopted by the State Legislature, could impact dealers. Here is a summary of relevant proposals: Sales Taxes State sales tax exemptions intended “to shield low-income households from burdensome taxation,” are inef- ficient. The Report suggests eliminat- ing some exemptions and using the resulting higher revenues to enhance targeted income tax credits. The Commission discussed the $2 cap on the state’s gasoline tax. While not directly endorsing its repeal, the Commission noted that doing so would yield about $371 million rev- enue annually for the state. Corporate Taxation The report also stated that the tax laws are too complicated and sug- 11

The Commission also suggested major reforms to New York’s estate tax, noting that the exemption levels for federal estate and gift taxes were recently raised to $5.25 million. It recommended that New York raise its estate tax exemption level to $3 mil- lion from $1 million and to reinstate the state’s gift tax for gifts above the $3 million level. Property Taxes The Commission found disparities with local governments’ property assessment standards, the variability in the frequency of assessments, and that multiple local governments per- form this work, increasing costs for New York businesses. They suggest- ed addressing those problems to reduce long-term costs. GNYADA will follow the results of the Report as the legislature addresses these issues in the next budget.

business tax that together have gener- ated more than $2 billion in addition- al tax revenue annually since 2010. According to the Associated Press, a Cuomo spokesman said the Tax Foundation's conclusions conflict with other performance measures. The spokesperson said the state unemployment is 6.9 percent, which is less than the national rate of 7.3 percent, and that Forbes magazine recently ranked New York 21st among states in comparing business climates. gested that they need to be reformed. More than 20% of corporate tax rev- enues are collected through audits. That high figure supports the need for reform and highlights the complexity of existing tax law provisions. The report recommended (1) combin- ing the MTA surcharge return with the main corporate tax return to sim- plify filings; (2) allowing limited lia- bility companies (LLCs) to pay annu- al filing fees when business owners file their personal income tax returns; and (3) making state audit practices consistent with those used by the IRS. Also, the Commission suggested narrowing the Investment Tax Credit, yielding $65 million in revenue. Personal Income and Estate Taxes The Commission also proposed per- sonal income and estate tax reforms, such as giving tax professionals more leeway to e-file returns on behalf of clients and eliminating obsolete processes to make the state’s income reporting requirements more like the federal requirements.

New York has Highest Taxes in the Nation

“Over the last three years, New York State has added more than 300,000 private sector jobs, received a posi- tive outlook from Standard & Poor's and Moody's (credit rating services), reduced barriers and lowered taxes for businesses and put the state on secure fiscal footing,” the spokesman said. The 2014 Index represents the tax climate of each state as of July 2, 2013 and includes corporate tax, individual income tax, sales tax, unemployment insurance tax and property tax data.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • December 2013

6