Tax reform is long overdue for New York and the state’s high taxes can no longer be ignored, said E.J. McMahon, president of the Empire Center for NY Policy.

McMahon said a drop in the state’s corporate and income taxes are needed to help boost the business climate in New York and keep companies in the state.

Unshackle Upstate recently proposed a five-point plan that lobbies for reducing taxes across the board for upstate New York including the corporate, income and sales tax.

“One interesting concept that Unshackle and I have talked about in the past is the idea of completely eliminating corporate taxation across the state in a way that would particularly benefit upstate,” McMahon said.

Joe Henchman, the Tax Foundation’s vice president for special projects, said he believes the corporate tax “is on the way to extinction.” He said New York has the worst business climate in the nation.

“It might be beneficial to figure out ways, consistent with the Constitution, of essentially eliminating all corporate taxation to send a strong signal that this is a region that is really different,” McMahon said.

McMahon said Gov. Andrew Cuomo’s effort to attract businesses under a new tax-free program is a targeted approach that is not going to transform the entire economy of New York.

He said the reality of the program, which was passed in June by the state Legislature, is that the governor’s office would make the decision about what businesses would receive tax breaks.

“If you are some college or university in upstate New York that thinks it will be able to attract a company to a tax-free zone…you can’t actually guarantee that private partner,” McMahon said.

The program, called START-UP NY, will allow some businesses to receive tax benefits for up to 10 years if they locate on or near a state college campus and reflect its academic mission.

The program, which starts in 2014, will attract companies that wouldn’t have considered locating to the state without a tax break, McMahon said.

“There is no question it will have some incentivizing effect and there will be some business activity significant and relative in scale to some of the regions they are in,” he said.

McMahon said the program will bring more businesses to the state but criticized START-UP NY’s limited approach that neglects existing businesses. He said the solution to that problem would be dropping the corporate tax.

“We need to stop monkeying around with targeted breaks…our new emphasis should be about being truly competitive,” McMahon said. “The best thing you can do for businesses in general is to create a more hospitable tax and regulatory climate.”

©2013 The Business Review

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