Legislative leaders' announced "framework" for agreement on a 2002-03 state budget preserves tax cuts that were passed in previous years that are due to take effect in the current fiscal year.
Preserving these tax cuts-which have an estimated value of $300 million-has been a top Council priority since the budget debate began in earnest in January. In recent months, pro-spending advocates and some editorial pages have intensified pressure on lawmakers to undo the tax cuts or even raise taxes.
"Our leaders' determination not to undo this progress is a victory for New York businesses and all New Yorkers," said Daniel B. Walsh, president/CEO of The Business Council.
"In our last recession, in the early 1990s, Albany reneged on some tax cuts, and then raised taxes outright-with catastrophic results," he added. "It is good to see that we have learned from those blunders and the hundreds of thousands of lost jobs that followed them."
The legislative leaders have also reportedly agreed not to "decouple" from federal tax policy on a key issue related to depreciation.
As a result, a federal tax reform that gives businesses a bonus depreciation allowance for certain assets will also save New York businesses on their state taxes. This would mean a savings on state taxes of as much as $300 million for state taxpayers.
Business Council President Daniel B. Walsh had urged the Governor not to decouple in a Nov. 8 letter. "It is essential that New York conform with any federal changes, to avoid losing ground to competing states," Walsh wrote.
New York and federal tax policies are "coupled" on many issues, including depreciation. The economic-stimulus law recently passed in Washington lets federal taxpayers take, retroactively, an additional 30 percent bonus depreciation allowance in the year certain assets are put in service. Because of the coupling, this tax reduction automatically will apply to state taxpayers.
A final state budget is still to be negotiated and requires approval of the full state Legislature. The budget framework is also said to include:
- An
expansion of the state's Empire Zone program. Empire Zones
are specially designated regions in the state in which
employers that invest in plants and create jobs can receive
powerful incentives, especially tax abatements. Most zones
are in economically challenged urban and rural areas.
- Some funding for high-tech R&D initiatives. The Governor's Centers of Excellence plan would fund university-based R&D collaborations in high-tech areas of economic promise. The Senate's plan calls for investments in biotechnology R&D at university, corporate, and government labs. The Council supports increased state funding for these initiatives.