Governor George Pataki’s Commission on Tax Reform and Simplification released in January its recommendations on how to reform New York State’s tax policy. The seven-member commission, chaired by economist Lawrence Kudlow, recommends New York cut its top personal income tax rate to 5 percent from 6.85 percent, reduce the number of tax brackets to three from five, eliminate taxes on capital gains and dividends, and reduce the corporate income tax to 5 percent.
The report’s executive summary made the following points:
- There is a clear relationship between state tax burdens and state economic health. States with high and rising tax burdens are more likely to suffer economic decline, while those with low and falling tax burdens are more likely to enjoy strong economic growth. Numerous academic studies, as well as real world empirical experience, show clearly that low tax states consistently outperform high tax states.
- Economic behavior, whether measured in terms of employment, work effort, saving, investment, risk-taking, entrepreneurship, or capital formation, is highly responsive to changes in marginal tax rates .
- Raising after-tax rewards for work, investment, and risk-taking is the surest path to long-term prosperity and competitiveness for the State of New York. It is essential that New York be more competitive in the global race for capital in the twenty-first century.
— David Pietrusza