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Last week’s state budget followed a familiar pattern: it was months late and included millions of dollars in new tax cuts. Fiscal watchdogs have criticized the tax cut package as a sop to politically-connected industries, and they warned that the tax cuts could lead to future budget shortfalls and force cuts in government programs.

Though the working poor stand to benefit from $125 million in tax breaks due to the state’s decision to increase the Earned Income Tax Credit, two-thirds of the state’s $375 million tax cut package goes to banks, insurance companies and a host of other industries from airlines and farmers to boxing promoters and beer brewers.

With their tax rates reduced from 9 percent to 7.5 percent, banks and insurance companies will get to save $150 million a year. Governor George Pataki and Senate Majority Leader Joseph Bruno pushed for this cut to ensure that these industries pay the same tax rate as general corporations, whose tax rate was lowered to 7.5 percent in last year’s budget.

Other cuts enacted last week include a 45 percent reduction in the exhibitions tax on boxing and wrestling matches, a 57 percent cut in the tax on pari-mutuel betting and a one-cent per gallon reduction in the beer excise tax.

“It’s disconcerting that in the middle of the night we do a whole list of business tax cuts with no planning or analysis to make sure that this is going to stimulate the economy or create jobs,” said Upper West Side Assemblyman Scott Stringer.

Frank Mauro, executive director of the Albany-based Fiscal Policy Institute, said that the most egregious tax break is the one that reduces the Alternative Minimum Tax (AMT) from 3 percent to 2.5 percent. Because of the state’s many corporate tax loopholes, large companies like GE, IBM and Kodak have effectively been able to reduce their tax rates well below the 7.5 percent rate paid by all other businesses. The AMT provides a tax floor, to make sure that these corporations can’t wind up paying no tax at all. This year’s AMT tax rate cuts arrive on top of the 1998 rate cut that lowered the rate from 3.5 to 3 percent.

“If there’s a slowdown in the economy or a slowdown on Wall Street, they’re not going to be able to accommodate these tax cuts without major cuts in government programs,” said Mauro. “They’re not going to be able to repeal the tax cuts with Governor Pataki in office.”

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