This article first appeared at The McAlvany Intelligence Advisor on Wednesday, October 29, 2014:

In a remarkable display of pure unadulterated pragmatism, New York State Governor Andrew Cuomo signed into law in 2014 an unheralded tax reform bill that has won approval from two think tanks: the and the Tax Foundation. In Cato’s “Fiscal Policy Report Card on America’s Governors” released earlier this month, the authors were positively ecstatic about him:

Governor Cuomo is one of the highest-scoring Democratic governors in this report. His score is buoyed by a major tax-cut package he signed into law in 2014.

The package cut the corporate income tax rate from 7.1 to 6.5 percent, reduced the corporate tax rate on qualifying manufacturers from 5.9 percent to zero, ended a separate bank tax system, ended a surcharge on utility customers, increased the estate tax exemption, reduced the property tax burden on manufacturers, and provided property tax breaks to homeowners.

The package was far from perfect, but it showed that Cuomo recognizes that New York’s tax climate is uncompetitive and needs improvement.

It also showed a side of Cuomo rarely revealed in public: that of a realist. On other issues such as abortion, gun control, and Tea Partyers he is intransigent. In January he was clear, and offensive, concerning conservatives living in his state:

Their problem is not me and the Democrats; their problem is themselves.

Who are they? Are they these extreme conservatives who are right-to-life, pro-assault-weapon, anti-gay? Is that who they are?

Because if that’s who they are … they have no place in the state of New York….

Offended by his remarks were Fox commentators Greta Van Susteren and Sean Hannity, who expressed their outrage on her show the next day:

Van Susteren: What’s the story? Are you leaving New York?

Hannity: If I could, I probably would … but I went home last night and my wife and I talked about this seriously.

I live in New York, Greta. I pay 40 percent taxes, the highest rated federal level. That doesn’t include FICA, Social Security. You’ve got nearly 10 percent in state taxes.

I work in New York City. I pay a New York City tax. I live in the second-highest property tax county in the country, which is Nassau County.

About 62 percent is my taxable rate of every dollar that I make. And, you know what? It’s too much. It’s almost like I’m facilitating the robbery of the hard-earned money that I’m making.

I’m not going to do it anymore. As soon as I am able, sometime probably when my son graduates from high school, I’m getting out of here as quick[ly] as I can.

For years the Tax Foundation has ranked New York at or near the bottom on the basis not only of how much money is taken from its citizens but how onerous and politically-motivated the tax system is.

And yet, thanks to Cuomo’s newly-awakened awareness of reality, the Tax Foundation’s conclusions were echoed by the Cato Institute:

New York’s corporate income tax ranking improved from 24th to 20th as a result of corporate tax reform passed this year that is starting to phase in.

Once fully phased in, the package will lower the corporate rate from 7.1 to 6.5 percent, eliminate the capital stock tax and corporate alternative minimum tax, extend net operating loss carrybacks from 2 to 3 years, and remove the carryback cap.

Once fully phased in, the [state’s] corporate tax component of the Index is expected to improve to 4th place.

New York has a long way to go, but at least it is starting the journey. At the very top of the Tax Foundation’s list reside eight states out of ten that have no state income tax at all, while at the bottom they all do. Noted the Foundation:

Property and unemployment taxes are levied in every state but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax.

Wyoming (#1), Nevada (#3) and South Dakota (#2) have no corporate or individual income tax. Alaska (#4) has no individual income or state-level sales tax; Florida (#5) has no individual income tax; and New Hampshire (#7) and Montana (#6) have no sales tax.

Using a different rating system that includes not only tax policy but patterns as well, Cato scored the states’ governor from “A” to “F.” Only four states (each run by a Republican, interestingly) got an “A”: Pat McCrory of North Carolina, Sam Brownback of Kansas, Paul LePage of Maine, and Mike Pence of Indiana.

North Carolina was given the “most-improved” citation by the Tax Foundation, jumping from #44 to #16, “the single largest rank jump in the history of the Index.” It added:

The state improved its score in the corporate, individual, and components of the Index, and as the reform package continues to phase in, the state is projected to continue climbing in the rankings.

Cato agreed, explaining:

Pat McCrory of North Carolina signed into law a major tax reform package in 2013 which replaced three individual income tax rates (6.0, 7.0, and 7.75 percent) with a single rate of 5.8 percent, falling to 5.75 percent in 2015.

The package also cut the corporate tax rate, repealed the estate tax, and broadened the base….

Governor McCrory approved further tax cuts in 2014 and he has kept a tight rein on spending.

It might be a bit much to ask Governor Cuomo to duplicate Governor McCrory’s success, but it might just serve as a model if Cuomo is serious about ending the bleeding of corporations and citizens like Hannity from his state. The problem facing Cuomo is himself, according to former New York Governor Eliot Spitzer:

The problem Andrew has is that everybody knows that behind the scenes he is the dirtiest, nastiest political player out there … that is his reputation from [his] years in Washington.

For an individual without character, however, pragmatism suits Cuomo well. May he continue in his quest to revive New York’s economy by applying the lessons taught by Cato and the Tax Foundation and learned by other governors like McCrory.

—————————

Sources:

The Tax Foundation: 2015 State Business Tax Climate Index – summary

The Tax Foundation: the full report

The Cato Institute: Fiscal Policy Report Card on America’s Governors 2014

Bio on Andrew Cuomo

The Wall Street Journal: Spitzer Says Cuomo ‘Dirtiest’ Player

Fox News: Is Sean Hannity really leaving New York after Gov. Cuomo’s anti-conservative comments?

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