screen-shot-2015-08-26-at-10-54-52-am-150x150-3744360New York’s tax climate for key business sectors—with the notable exception of manufacturing—ranks at or near the bottom among 50 states, according to a new study by the Tax Foundation and the KPMG accounting firm.

The study, “Location Matters,” differs from the Tax Foundation’s better-known annual  “State Business Tax Climate Index” in that it focuses more tightly on effective tax rates: i.e., what different types of firms actually pay to state and local governments as a share of income after factoring in tax credits and incentives.

The study focuses specifically on both mature and new firms in sectors including capital- and labor-intensive manufacturing, corporate headquarters, corporate R&D headquarters, retail stores, call centers and distribution centers.

The summary rankings from the study are below.


New York’s relative light tax burden on manufacturers—especially capital-intensive manufacturers, who can claim the state’s generous investment credits—was pointed out in a previous version of the same study a few years ago. Last year’s phase-out of state corporate taxes on manufacturers won’t do too much to change this, since the effective rate on such firms was only 1 percent before the new policy was adopted, the Tax Foundation and KPMG estimate.

On the other extreme, New York imposes an exceptionally stiff tax burden on corporate headquarters and R&D headquarters—except, in the latter case, newer firms qualifying for Excelsior Tax Credits.

“New York’s extensive reliance on incentives for certain firms leads to higher effective rates for mature firms,” the study points out.

Of course, that’s the same effect created by another program unmentioned in the study—START-UP NY, which zeroes out taxes for firms new to New York if located in zones on or near college campuses.

Important caveat: the study modeled two cities for different types of sectors. For corporate headquarters, R&D headquarters and retail, the location was assumed to be New York City, which adds its own higher business income tax to the state corporate income tax, pushing the effective rate into double digits.  For other sectors, the firm location was assumed to be Utica.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

New Data Confirm New York State’s Q1 Economic Plunge

New York's economy ended the first quarter of this year in virtual free fall, the latest federal data show. The Empire State's real gross domestic product (GDP) decreased 8.2 percent in the first three months of 2020 compared to the fourth quarter of 2 Read More

NY outlook: worse than 2008-09

#NYcoronavirus: The outlook for New York's economy is the grimmest on record, according to the first post-pandemic lockdown round of credible economic surveys and forecasts. Start with the Federal Reserve Bank of New York, whose regional economists today issued a notably pessimistic report based on their monthly Empire State Manufacturing Survey and a broader Business Leaders Survey that take sin the northern New Jersey and metropolitan New York. Read More

Wind costs could blow up

The long-term cost of subsidies for New York’s new offshore wind turbine projects could exceed $6 billion—or three times the amount acknowledged by Governor Andrew Cuomo’s energy agency. Read More

Session’s end clobbers NY economy

The closing days and hours of New York State’s 2019 legislative session were easily among the most economically consequential in Albany’s recent history—but not in a positive sense. Read More

Key Cuomo budget update late—again

How big are the fiscal challenges faced by New York State in second half of its 2019 fiscal year? Are tax receipts and spending living up with projections? What's the outlook for the next few years? We don't know—because, for an eighth consecutive year, Governor Andrew Cuomo has missed the statutory deadline for producing a Mid-Year Financial Plan Update. Read More

Soaking the rich—or not

New York State's so-called millionaire tax, temporarily raising the state's top income tax rate to 8.82 percent from the permanent law limit of 6.85 percent, is next scheduled to expire at the end of 2019. The added tax generates roughly $4.5 billion a year, about 9 percent of net personal income tax revenues, making New York more dependent than ever on the highest-earning one percent of its taxpayers. The future of the tax has now emerged as an issue in the gubernatorial campaign. Read More

NY’s leaky gas taxes

When motorists in New York top off their gas tanks this Labor Day weekend, they’ll be paying an average of about 45 cents per gallon in state and local fuel taxes—the 5th highest total in the nation, and second highest in the Northeast. Read More

A SALT cap surprise (so far)

The newly enacted federal income law provision limiting state and local tax (SALT) deductions "is likely to substantially decrease home values" in New York, Connecticut, Maryland and New Jersey. That's a key claim of the lawsuit filed by the four states against the Trump administration today with the goal of having the $10,000 SALT deduction cap declared unconstitutional. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.