This month, we welcome you to the state with the city that never sleeps. New York conjures up images of buildings larger than life, flashing billboards, prestigious universities, American history, and so much more. The state is rich with culture, business, and prosperity.
There’s a lot more to New York State than just New York City. In fact, the state is almost 55,000 square miles and of that area only 470 belongs to New York City. But that relatively small area includes Wall Street, and the nation’s hub of the financial industry.
New York is the home to several financial services corporations, including Morgan Stanley, Citigroup, and Goldman Sachs. In 2012, the securities industry accounted for almost 22% of the city’s total private sector wages. The total wages for the industry were $59.3 billion. Despite the high total wages, only 5% of total private sector jobs came from the securities industry. The average private sector wage in 2012 was $69,200. The average salary (including bonuses) for the securities industry was $360,700, which is over 5 times larger than the private sector average. Of course they are being taxed heavily as well, with 16% of the state’s tax revenue coming from these activities.
Other industries important to New York’s economy include the industrial-commercial, tourism, service, and agricultural industries.
New York has an unfavorable tax climate ranking 49th out of 50 states, according to the Tax Foundation’s 2015 State Business Tax Climate Index.
Of the 5 taxes the Tax Foundation ranks, New York ranked unfavorably in 4 out of the 5. The statewide sales tax (4.00%) in New York is relatively low compared to the national median (5.95%). However, once the local sales tax rate is accounted for, the average sales tax rate in the state is 8.47%. The state collects $1,897 of sales and excise tax per person, which ranks 7th highest collection nationally. New York’s sales tax ranking is 40th out of 50. New York City and Brooklyn both have a sales tax rate of 8.875%.
The property tax (ranked 46th out of 50) is almost as high as the skyscrapers in New York City. The state collects $2,335 per person in property taxes, which makes their collections the 4th highest in the nation. The individual income tax (ranked 49th out of 50) has 8 brackets and the highest set at 8.82%.
The corporate income tax (ranked 20th out of 50) seems to be one of the things that is working sufficiently for the state. The corporate income tax is a 7.1% flat rate. The good news for New York is that a recently passed tax reform will lower the rate to 6.5%. In addition it will eliminate capital stock tax and corporate alternative minimum tax, extend NOL carrybacks to 3 years instead of 2, and remove the carryback cap.
However, with its tax reform the state also enacted a new nexus threshold which will increase the number of companies in the tax base. Any company with sales in excess of $1 million is now deemed to have nexus or taxable presence in the state and is subject to the income tax, whether they are physically located in the state or not.
Tax Credits & Incentives
New York offers various income tax credits. Some credits of note include:
START UP – NY: This program is for qualified businesses that will relocate or expand within New York. A business can be 100% tax-free for 10 years. The business must also partner with a college or university, create new jobs, and contribute to the economic develop of the community. The business must locate in a tax-free zone, which is designated by universities/colleges, and sometimes includes office spaces or work facilities that are within the school’s campus. The program is administered by the Empire State Development (ESD), a chief economic development agency.
Excelsior Jobs Program: Firms in industries engaged in strategic business, such as biotechnology, pharmaceutical, financial services, manufacturing, etc. are eligible to apply for some of the tax credits this program has to offer. The company must meet a certain quota of new jobs depending on the operations the business engages in (e.g. software development firms need to create at least 5 net new jobs or distribution firms need to create at least 75 net new jobs). Here are some of the tax credits:
- Jobs Tax Credit: 6.85% of wages per new job
- Investment Tax Credit: equal to 2.00% of qualified investments
The program is capped at $500 million in tax credits. Qualified businesses must file an application to be submitted to the ESD and enter into a formal agreement if the application is approved.
- The National Baseball Hall of Fame and Museum is located at Cooperstown, New York. The first class of inductees was selected in 1936.
- There’s a small town in Chemung County called Horseheads. It is the only town in the US that is dedicated to the service of the American military horse.
- New York City’s population is roughly 8.5 million. The state’s population is about 20 million.
- About 20-30% of New York’s parking tickets are for double-parked commercial delivery companies. In the first quarter of 2013, one delivery company received almost $2 million in parking fines.
- The Empire State Building is so large that it has its own zip code (10118)