On December 9, Governor Cuomo signed a bill into law that will provide $25 million in tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s for job creation. Specifically, the bill gives preferences to businesses “that hire, train, and retain disadvantaged inner-city youth over the first six months of 2012.” This morning, Cuomo signed another bill that cuts the New York payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. by $250 million. This week, I also expect that Cuomo will soon sign his latest hallmark tax plan to extend (with a reduction) millionaire’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es that were set to expire at the end of this year.
I’ll give a quick hit on each of the proposals:
Job Creation bill: Tax credits would likely have little impact on New York’s youth unemployment problem. Its causes are likely more systemic, with possible causes including the economy as a whole, the education system, the effect the minimum wage has in discouraging youth employment, and even the War on Drugs. If the problem really is that the state’s high taxes discourage economic growth, a modest, temporary tax credit doesn’t address it. An overall reduction across-the-board would.
Payroll tax cut: Though some are worried that the cut in the payroll tax will bankrupt New York’s Metropolitan Transit Authority, cutting a payroll tax tends to be one of the more neutral ways to cut taxes. One of the main things that Cuomo should be commended for is the fact that his payroll cut is actually a permanent plan, unlike some programs at the federal level.
Millionaire’s Taxes: My colleague Mark Robyn and I explore some of the arguments against having the rich bear a disproportionate amount of the income tax burden in the Wall Street Journal:
“As many states face increasingly large budget shortfalls that are often related to economic cycles, leaning on high-income earners and small businesses to pick up a disproportionate amount of the bill raises serious equity concerns and is bad for government revenue stability,” said Scott Drenkard, an analyst with the Tax Foundation.
He notes many businesses, 94 percent of which file as individuals, and high-income earners have the most volatile income. If the economy continues to slip, they will have less revenue and that could further hurt businesses or prompt them to flee.
New York and California already share another distinction: They have experienced some of the greatest flight of taxpayers from 1999 to 2009 and have tax structures considered among the least attractive to businesses, according to the Tax Foundation.
More on New York here.
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