New York, Taxes and 2011

New York, of course, is a costly place to start up and run a small business. And the problems are all about government run amok.

On the “Small Business Survival Index 2007,” which ranks the states according to their public policy climates for entrepreneurship, New York ranked a sad 46th, or sixth worst among the 50 states and District of Columbia.

In today’s (January 21) Newsday, Richard Galant offers a solid analysis on what the expiration of the 2001 and 2003 Bush tax relief measures would mean for many in the Empire State. New York’s congressional delegation and the presidential candidates, who will start to focus on New York with the state’s February 5 primary fast approaching, should take note.

Galant pointed out:

Do you ever get the feeling that your taxes are too low?

 Probably not. Last year, New Yorkers paid an average of $37.10 in taxes for every $100 earned. That number, which includes sales, income, property and all other taxes, marks the highest tax burden for state residents in at least 47 years, according to the nonprofit Tax Foundation…

An economist with a PhD from Syracuse University, [Robert] Carroll points out that Long Islanders and local companies have a lot at stake in the tax debate. If they run a small business or work as a dentist or partner in a small law firm, they are likely to pay personal income taxes on the earnings of their business. 

Imagine that the Bush tax cuts expire in 2010, as current law provides, and that the cap on Social Security earnings is raised. Some high-income taxpayers could see their marginal tax rate go as high as 59 percent, compared to roughly 42 percent now. "There should be very serious concerns about how those rates would affect business owners' willingness to continue to operate their businesses, to expand their businesses and to hire people," Carroll says.

 New York companies that compete internationally pay the highest corporate tax rate among industrialized nations, he says. As the burden has grown, others such as Germany, France and Ireland have cut their rates.

Galant closes out the piece noting that if the massive tax hikes now scheduled for 2011 happen, “you may look back on 2008 as a time when, relatively speaking, your taxes were low.” That’s particularly frightening in New York, but entrepreneurs and businesses across the nation should be scared.