What a Corporate Tax Increase Might Mean for New York
- Apr 21, 2021
President Biden is calling for raising the corporate tax rate from 21% to 28% and increasing taxes on U.S. companies’ foreign earnings to cover the costs of the administration’s proposed $2.3 trillion infrastructure package. The president has indicated a willingness to reduce the cost (tax rate) of the proposal. Representative Charlie Crist (D., Fla.) said lawmakers discussed the potential for a more modest corporate rate increase (from 21% rate to 25%) to help pay for the infrastructure proposal.
Separately, lawmakers are considering allowing individual state and local tax deductions—that were disallowed under the tax 2017 legislation—for individual income tax AMT purposes. A large percentage of high net worth clients paid the AMT prior to the enactment of the 2017 legislation and, therefore, did not receive state and local income and real estate tax deductions. New York saw a significant number of residents leave the state and city based upon the 2017 legislation and its non-deductibility of New York state and local income and real estate tax. If the aforementioned tax proposal and deductibility of state and local taxes become law, it could boost New York State and New York City residency.
Here are some interesting and little-known facts regarding the financial stimulus and the contribution of New York City’s creative community alone. During the 2018/19 season (the last before the Q1 2020 COVID-19 epidemic), the Broadway theater sector contributed $14.7 billion to the economy of New York City and supported 96,900 jobs. This amount consisted of direct spending for (1) producers to produce and run shows; (2) theater owners to maintain and renovate venues; and (3) ancillary purchases by tourists, defined as non-NYC residents who said that Broadway was a very important reason for their visit.
The money that was directly spent in these areas was then re-spent in multiple subsequent rounds, until the original sums left New York City. The sum of the original spending and the subsequent rounds total a combined contribution of $14.7 billion. According to the “Broadway League, Research and Statistics Reports,” this is far more than all of NYC’s professional sports teams combined.
The full contribution of Broadway tourists totaled $9.6 billion, shows contributed $2.2 billion, and theatres $17 million, for a total of $11.9 billion to New York City’s economy. Broadway supports 87,000 jobs and generates $500 million in taxes to New York City. Again, this is according to the “Broadway League, Research and Statistics Reports.” Furthermore, New York City Comptroller Scott Stringer indicated that in 2017 New York City’s creative sector directly employed more than 293,000 people and paid $30.4 billion in wages.
As you can see, New York has a lot riding on if corporate tax rates do increase and just how they increase.
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Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.
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