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SARATOGA SPRINGS, N.Y. -- Quad/Graphics employed fewer than 500 workers on its bucolic campus here in 1996. It wanted to add catalogs to fill in the gaps in its magazine-printing schedule, but catalog companies that bought its services faced hefty sales taxes.

So it successfully lobbied the state for a sales tax exemption. Today, the company has nearly 1,300 employees spread over 1.2 million square feet of manufacturing space in this picturesque tourist town. It churns out 12 million catalogs a week when it's not printing Time, Newsweek, People, Us or Sports Illustrated magazines.

The tax break for Quad/Graphics was among 156 tax cuts passed in New York the past six years. Armed with a strong economy and soaring profits on Wall Street, about 200 miles south of here, the state embarked on what officials claim is the longest, largest tax-cutting campaign in the nation. It's a concerted effort to change the state's reputation as overtaxed, overregulated and anti-business.

And slowly, it's having an impact.

"Our plant doubled its size within two years of the repeal," says Richard Marsel, plant manager at Quad/Graphics. "New York now is the most tax-friendly state, as far as the printing business goes."

Because New York's combined state-local tax burden is the highest in the nation, its effort to slash taxes isn't surprising. Since 1995, it has cut income, business and sales taxes; even the beer tax was slashed a nickel a gallon.

Not all of the state's 18.2 million residents have noticed. In the trendy shops and restaurants along Broadway here, just 30 miles north of the state capital, residents still feel overtaxed. "This is a good place to live, but the tax part has always been a problem for people," says David Bennett as he stacks newspapers at Saratoga News Stand.

And in the 1990s, tax cuts have come at a price.

Republican Gov. George Pataki gets credit for rejuvenating the business climate. However, critics say the state's $37 billion debt, which requires annual payments of $3.4 billion, is too high, its reserve funds too low and its higher education system needs aid.

The governor even takes a hit from those who say the tax cuts didn't go far enough. After two years of major reductions, including a cut in the top income tax rate, "New York went back to its high- spending ways" in 1997, says Brian Backstrom, vice president of the anti-tax group CHANGE-NY.

The state has taken pains to burnish its image. Historically, New York has put labor relations and environmental regulations ahead of business interests.

"It appeared that New York was in the position of, 'Let's milk business for everything we can get out of them,' " says Joseph Dalton, president of the Saratoga County Chamber of Commerce.

Pataki defeated Democratic Gov. Mario Cuomo in 1994, just as the state was emerging from the last recession. Since then, he has staked his reputation on cutting taxes and making the state friendlier to business. The state has cut income and sales taxes every year since 1995; it has cut 19 different taxes 57 times, in 156 different ways.

"We have cut taxes by far more than any state in the country," Pataki says. "These tax cuts have turned around our economic climate. We are seeing economic growth at our fastest pace in 43 years."

The state now ranks 35th in percentage of income taxed, down from 22nd in 1990. The combined state and local tax burden, fueled by high school taxes, remains the highest in the nation.

This year, the state cut another $1.3 billion. It slashed utility taxes and made college tuition deductible. New York also has begun to rebate some local property taxes that support schools -- by far the greatest burden on the state's taxpayers.

"We're now seeing the perception of the business climate in this state changing," says Kevin O'Connor, president of the Albany region's Center for Economic Growth, which united local government officials last month in a campaign to attract high-technology firms.

The benefits have rolled through the state gradually, beginning in New York City and moving north. Here in Upstate New York, private employment growth has been rising since 1997.

Last year, it exceeded the national average of 2.3%.

Among the signs of progress:

* In the Hudson Valley north of New York City, Philips Semiconductors announced last month that it would buy an IBM facility and invest $100 million while retaining the 950-member workforce. Despite the tax burden, "we believe the area provides a business climate conducive to our growth in the years ahead," chief operations officer Stuart McIntosh says.

* In the state capital region, Albany Molecular Research has grown from a private drug research and development company in 1991 to a $44 million company listed on the NASDAQ stock exchange. It has 280 workers and 130,000 square feet of space. Company chairman Thomas D'Ambra considered Michigan for expansion until New York agreed to spend $2 million.

* In Saratoga County, the local economic development corporation supports about 120 projects a year, up from 20 to 30 when times weren't so good. That creates 2,000 jobs a year, up from 300. The city's Downtown Business Association welcomed about 50 new members this year. "The boardrooms of those companies are now saying, 'Well, New York state is trying harder,' " says Kenneth Green, president of the corporation.

However, with progress come pitfalls. Liberals say the emphasis on tax-cutting has starved programs for the poor and middle-class. Local governments complain that the state has not come through with promised aid. And the highway between here and Albany is jammed at rush hour.

Traffic jams are "the kinds of problems that are associated with progress and prosperity," Saratoga Springs Mayor Ken Klotz says.

"We'd rather be booming than not. We're trying to manage it."