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December 29, 2004

Doing Business Is Too Costly in New York, Policy Group Says

By AL BAKER

ALBANY, Dec. 28 - Even after a decade under a Republican administration that made tax cutting a priority, New York State still burdens its businesses with such high taxes and other costs that its ability to create and keep jobs is being hurt, a business lobbying group said on Tuesday.

In updating its report on the price of doing business in the state, the group, the Public Policy Institute of the Business Council of New York State, said it had found that many costs - including the average premium for health insurance, the average cost of a workers' compensation case, the retail price of electricity and natural gas and unemployment insurance taxes - are higher in New York than in most other states.

The report comes at a time when the state and its agencies - most prominently, the Metropolitan Transportation Authority and the Education Department - are facing enormous gaps between their needs and state revenues. Some officials have said the state needs to re-examine its tax structure to find ways to increase revenue to deal with its $6 billion deficit, but, in a preview of the debates certain to dominate the forthcoming session, the Business Council made it clear on Tuesday that it wants taxes to go down.

Robert Ward, director of research for the business group, said that the Pataki administration had made some progress in reducing the tax burden, but that recent tax increases had trimmed the progress back.

"We have made some progress, but we still have a long way to go," Mr. Ward said. "Unfortunately, in the last couple of years, looking at taxes, we have gone backwards. We have raised taxes much more than most other states, both at the state and local levels, and that is going to hurt us."

To help close an $11.5 billion budget gap in 2003, the state instituted a surcharge on taxable earnings of more than $100,000 for single people or more than $150,000 for married couples. That surcharge, which raised the state tax rate to 7.5 percent from 6.85 percent for that group, is set to expire at the end of next year, and Mr. Ward said he saw no reason for politicians to extend it.

The state also increased the sales tax on clothing items costing less than $110, an increase that is set to expire in the coming year, Mr. Ward said.

A study last year by the Citizens Budget Commission found that New Yorkers pay more of their income in local taxes than residents of any other state. Mr. Ward said that Census Bureau figures from 2002 showed that New York also ranked high in the categories of property, sales, income and corporate taxes.

At the same time, those who are employed in the state are generally earning less money than they could, Mr. Ward said, because the high taxes and business costs tend to divert money from payrolls. The result is that New York is a poor choice for businesses and workers, he said, with many urban areas in upstate New York losing economic vitality.

Reaction to the report was mixed in the State Capitol on a day when lawmakers were on vacation before the new legislative session is set to begin next week with a speech by Gov. George E. Pataki.

Frank J. Mauro, the executive director of the Fiscal Policy Institute, a nonprofit research organization financed, in part, by money from unions, said one part of the business council's own figures show that New York actually has a lower cost of doing business than all of its neighbors except Pennsylvania. Mr. Ward said that fact was only one in a number of measures that the group used and did not detract from its overall premise.

Edmund J. McMahon of the Manhattan Institute, a conservative policy group, said the report underlined the "big policy failures" of the triumvirate that has held power in Albany for the past decade: Mr. Pataki; Joseph L. Bruno, a Republican and the majority leader of the State Senate; and Sheldon Silver, a Democrat and speaker of the State Assembly.

"It highlights the disconnect between Albany and the real world," he said. "That the state is in so much trouble, competitively, and none of the key players up here have any intention of dealing with it."

A spokesman for Mr. Bruno pointed out the Senate's efforts in creating economic development programs, which Mr. Ward praised but said were too limited. "This report makes it clear that much more needs to be done to make New York State more competitive," said the spokesman, Mark Hansen.

Todd Alhart, a spokesman for Mr. Pataki, said the administration would review the report, but argued that no one was fighting harder than the governor to cut taxes, create jobs and improve the state's business climate. "Since Governor Pataki took office in 1995, our state has cut 19 different taxes 75 different times to save New York's people and businesses well over $100 billion," said Mr. Alhart. "No state even comes close to matching New York's tax-cutting record."

Copyright 2004 The New York Times Company