New York’s Leaders Join the Quest for Tax Fairness; Governor Cuomo Emphasizes the Need to Close Loopholes
Tax fairness has finally become a front burner issue for New York State policymakers. While academics and advocates have long raised questions about the uneven nature of New York’s tax system and the existence of ineffective and unproductive tax loopholes, most policymakers focused on the overall level of taxation and on the creation of additional tax breaks crafted in the name of economic development. While well intentioned, these tax breaks have been ineffective for the most part. But beginning in late 2011, things have changed with Governor Cuomo and the legislative leaders bringing additional light to bear on the tax load carried by different segments of the population relative to their ability to pay. And in his January 2012 State of the State address, Governor Cuomo took direct aim at the need to close tax loopholes.
The leaders’ welcome emphasis on tax fairness emerged publicly last month. In a joint press release issued on December 6, 2011, Governor Cuomo, Speaker Silver, and Senator Skelos announced that they had agreed to a number of “tax code reforms including a temporary restructuring of current tax brackets to reduce taxes for 4.4 million middle-class New Yorkers.” But they also announced that “the Governor is also establishing a commission to examine a comprehensive overhaul of the state’s entire tax code that will make it simpler and fairer for all taxpayers and to create economic growth in the state.”
A later section of that December 2011 release provided additional detail on the agreed-upon “Fair Tax Code Reform.” In that section of the release, the three top leaders noted that “through an executive order, the Governor has created the New York State Tax Reform and Fairness Commission to address long term changes to the tax system and create economic growth. The commission will have thirteen members, including four recommended by the Senate and Assembly majority leaders and two recommended by the Senate and Assembly minority leaders. The chair of the Commission will be appointed by the Governor. All members are required to have expertise in the tax field and will receive no compensation. The Commission will conduct a comprehensive and objective review of the State’s taxation policy, including corporate, sales and personal income taxation and make revenue-neutral policy recommendations to improve the current tax system. In its review, the Commission will consider ways to eliminate tax loopholes, promote administration efficiency and enhance tax collection and enforcement.”
Governor Cuomo continued to expound on this theme in his January 4, 2012 State of the State address. In the press release on the State of the State message, the Governor’s Office said that, in keeping with “efforts that began at the end of 2011 to reform the state tax code to boost job creation and improve fairness, Governor Cuomo announced the creation of the Tax Reform and Fairness Commission to propose additional, long-term changes to corporate, sales, and personal income tax systems, and to find ways to close tax loopholes, promote efficiency in administration, improve New York’s business climate, and enhance collection as well as enforcement.”
In the published version of the State of the State message, Governor Cuomo said, “Our recent reforms to the state’s tax code will boost job creation and restore fairness to the tax system. While these reforms were huge steps forward, there is more work to be done to create a complete fair tax plan. That is why I am creating a Tax Reform and Fairness Commission to propose additional, long-term changes to our corporate, sales, and personal income tax systems. We will find ways to close tax loopholes, promote efficiency in administration, enhance collection and enforcement, and simplify the tax code to improve New York’s business climate, especially for small businesses.”
But the clearest focus on fairness and closing loopholes came in the Governor’s actual remarks and in the PowerPoint presentation that he screened in conjunction with his January 4, 2012 speech.
In the State of the State message as actually presented by the Governor, and in the accompanying PowerPoint presentation, the emphasis was on the closing of loopholes.
The proposed Tax Reform and Fairness Commission was the subject of the PowerPoint presentation’s 204th and 205th pages. These slides were part of the “Progressive Future” section of the presentation which begins on page 183 of the 255-page document.
On page 204 of the PowerPoint presentation, it is noted that “Great work (was) done to restore fairness.” This is a reference to the changes in the Tax Law that were signed into law by Governor Cuomo on December 9, 2011.
And on page 205 of the presentation, it is noted that there is “more to do to close loopholes and help small businesses by simplifying the tax code;” and that the Governor “will form a bipartisan commission.”
In discussing these two slides during his presentation, Governor Cuomo said, “We have done great work when it comes to tax fairness. There is more work that we can do. We can go through that tax code and we can close loopholes, we can make it more fair, we can make it more pro-growth. There is a lot of work to do. I want to appoint a Tax Reform and Fairness Commission to go through the whole code to close those loopholes. I want to do it on a bipartisan basis in partnership with the legislature and let’s get New York to have the fairest tax code in the nation that also incentivizes job growth in this state.”
The Governor’s emphasis on closing loopholes in a way that both makes the tax system fairer and incentivizes job growth is heartening. Delivering on this objective will require an unbiased review of the litany of tax breaks that have enacted over the years in the name of economic development. Which ones actually create jobs and which ones do not? Which ones should be retained intact, which ones should be repealed, and which ones should be reformed? A year of careful study makes sense for a fundamental restructuring of the tax code but the most egregious loopholes, that stick out like sore thumbs, should be closed now and not a year from now.
Image source: Christian Science Monitor.