by Senator James Seward
The recently adopted 2016-17 state budget included a major new tax cut which will bring middle class income taxes down to the lowest rate since 1948.
By 2025, when the tax cut is fully phased in, average savings will reach $700 per taxpayer per year—including many small businesses filing under the Personal Income Tax (PIT)—for an annual total savings of $4.2 billion.
This tax cut was born out of a plan my senate Republican colleagues and I introduced earlier this year.
The cut was not part of the governor’s budget proposal, and it was included in the final budget at the insistence of the Senate Majority.
While the tax cut will pay dividends for years to come, I am still working to advance other measures that can further reduce the tax burden facing small businesses so that they can have more resources to invest, grow, and create jobs.
The New York State Senate has just passed a bill which would significantly expand income tax exemptions to reduce small business costs.
The bill, S7235, expands upon the current Personal Income Tax (PIT) exemptions for small businesses that were originally advanced by the senate in 2014.
To currently qualify for the PIT exemptions, the business must be a sole proprietor (regardless of how the business is structured, sole proprietor, LLC, etc.), have less than $250,000 in net business income and employ at least one employee.
The current exemption is equal to five percent of net income in 2016 and beyond.
The new legislation increases the PIT exemption from 5 percent to 15 percent for small businesses beginning on or after January 1, 2017; eliminates the employee qualification; raises the income eligibility threshold from $250,000 to $500,000; and expands small business eligibility to include any business that files under PIT (regardless of how the business is structured, sole proprietor, LLC, etc.).
The bill also reduces the Corporate Franchise Tax business income rate for small businesses from 6.5 percent to 2.5 percent.
It would increase the threshold for corporations to be considered small corporations from $290,000 to $400,000 and allows businesses with incomes between $400,000 and $500,000 to have a blended rate between 6.5 percent and 2.5 percent.
Despite recent efforts, New York still has the unfortunate moniker as the state with the highest tax burden in the nation.
Additional tax cuts must be enacted to help turn the tide.
This legislation is one more positive action that will help reduce the unfair tax burden we all shoulder.
This bill was approved by the senate by unanimous vote.
I am hopeful the assembly will move on it quickly so it can be forwarded to the governor for his consideration.