A coalition of labor unions, religious groups, and others are urging Governor Cuomo and the legislature to close what they say are loopholes in the law that protect large corporations from paying their fair share of taxes.
Ron Deutsch, with New Yorkers for Fiscal Fairness, says the state could begin to close its $2 billion dollar budget deficit and have more money for schools and health care if it began collecting more taxes on corporations and other businesses who the groups believe are underpaying right now.
“Our corporate tax policy is more akin to swiss cheese than we’d like the think,” Deutsch said. “Because it’s filed with holes.”
Deutsch offered charts that showed major companies headquartered in New York, including American Express, Corning, and Travelers, paying 1% or less of their total profits in taxes. Other companies, including Verizon, and Goldman Sachs, paid a tax rate of 3.5% or less.
Deutsch says the loopholes that should be closed include a provision that allows out of state residents who make money from hedge funds to avoid paying taxes in New York. The groups also believe real estate partnerships are avoiding some taxes. They point to an IRS audit that estimates that real estate investors underpaid $5 billion dollars in taxes to the federal government and $385 million dollars to New York State.
The groups say those changes alone could net the state $1 billion additional dollars a year.
Matt Gardner, with the Institute on Taxation and Economic Policy, says there’s nothing new about corporations getting tax breaks. He says it’s a trend that’s been going on for the past three decades, but recently, the public has begun to notice, and become angry.
“The public has something approaching a broad consensus on the fact that corporations ought to pay their fair share,” Gardner said. “And that they are not currently doing so.”
The groups also think New York’s alternate minimum tax is set too low. That’s the tax established to ensure that corporations that take advantage of other tax breaks still pay something in state taxes. In the past couple of decades, the alternative minimum tax rate was rate has been cut from 3.5% to the current rate of .75% for manufacturing companies. The groups recommend an extra assessment on companies that gross more than $5 million dollars a year.
Governor Cuomo, in his state of the state message, announced the formation of a Tax Reform Fairness Commission, that he said would among other things, find ways to close tax loopholes. But Cuomo did not specify which loopholes he had in mind.
Assembly Speaker Sheldon Silver, a Democrat, is also open to the idea.
“We would be more than amenable to finding true, meaningful loopholes that need closing ,” Silver said.
But the leader of the state’s Business Council, Heather Briccetti, says now is not the right time to be raising taxes on corporations. She says a recent survey found New York 49th in the nation for having a hospitable tax climate for business.
“In terms of our competitiveness, I think it’s a very hard argument to make that we’re letting businesses escape without paying their fair share of taxes,” Briccetti said.
And, she says the charge that corporations in New York aren’t paying enough taxes is “ludicrous”. She points to revenues from the financial industry, which account for 20% of all taxes collected in New York.
Briccetti says there’s another reason why some corporations have been paying lower taxes lately. In the recession and it’s aftermath, they aren’t making much money.