If you are an aspiring entrepreneur, Gov. Andrew Cuomo just gave you a couple of extra reasons to set up shop on his side of the border.
If you think your idea can eventually furnish you $2 million in annual income, you may want to give it a second thought.
In early December, Cuomo signed a bill cutting a tax on small businesses that has supported MTA operations, with more than 25,000 small businesses in Westchester County alone to benefit among nearly 290,000 businesses statewide, and 410,000 self-employed New Yorkers.
That followed what Cuomo called his “fair tax plan,” which he said will result in middle-class families paying the lowest tax rate in nearly six decades ”“ but which critics note will continue a millionaires tax on the books that was slated to expire at the end of this month.
Combined, the two moves could have significant implications for individuals and businesses weighing whether to establish residency in Fairfield County or in New York in light of Connecticut Gov. Dannel P. Malloy”™s tax increases enacted earlier this year.
“It”™s kind of consistent with what”™s going on in Connecticut,” said Bill Conron, a partner in the Norwalk and White Plains, N.Y., offices of Citrin Cooperman. “Governor Malloy ended up having to raise taxes ”¦ on the higher income earners. It”™s not really a surprise. It didn”™t really seem like taxes were headed in the opposite direction.”
Conron added that compared with New York and New Jersey, Connecticut residents still have a lower tax burden ”“ though the three states have the worst tax burden in the nation, according to the Tax Foundation.
In New York, households with less than $2 million in income will see their tax rate drop anywhere from 0.4 percent to 2.1 percent. Income taxes will hold steady for those earning more ”“ in effect amounting to a tax increase given the millionaires tax expiration.
The National Federation of Independent Business cheered the moves.
“The emphasis on a flatter tax code that reduces the burden for millions of middle-class residents and business owners is extremely sensible and forward-looking,” Mike Durant, NFIB”™s state director, said in a statement. “The easy thing to do in a state like New York is to ”¦ raise taxes on small businesses. This is a very serious attempt to restore New York”™s economic competitiveness regionally, nationally and internationally.”
Through the first five months of the fiscal year that began this past July, Connecticut income tax collections were up 24 percent, with the state Department of Revenue Services attributing some of the increase to additional withholding employers are taking in a compressed period, after failing to adjust for accelerated tax increases in the latter half of the calendar year, with year-end bonuses and overtime a contributing factor.
As Connecticut state economist Daniel Kennedy points out in the December edition of The Connecticut Economy, the total personal income earned by Connecticut residents increased by 1.2 percent between the first and second quarter on the eve of the Malloy tax increases, according to statistics from the U.S. Bureau of Economic Analysis. That represents an additional $2.5 billion in spending or saving power in the hands of Connecticut consumers, Kennedy added ”“ and measured from a year ago, Connecticut income was up 4.9 percent, equal to $9.7 billion in additional income.
With Connecticut still saddled with one of the highest debt burdens in the country ”“ at $6,800 for each resident or 14.5 percent of annual income according to the state Office of Legislative Research ”“ businesses alike have little expectation for the time being for more of that money to find its way back into their pockets.
“Hopefully (we”™ll) grow our way to the point where we can start to talk about reducing taxes,” said Tom Santa, CEO of Santa Energy Corp. in Bridgeport and incoming chairman of the Connecticut Business & Industry Association.
