Tuesday, May 28, 2013

Syracuse: Governor Cuomo's Tax-Free NY First of its Kind in US, Economists Say

Gov. Andrew Cuomo's Tax-Free NY first of its kind in U.S., economists say

Governor Cuomo Visits Syracuse - May 22, 2013
Economists are saying that Gov. Andrew Cuomo's new Tax-Free NY program is the first of its kind in the country. Cuomo is shown here in Syracuse Wednesday visiting Upstate Medical's Weiskotten Hall. (Stephen D. Cannerelli | scannerelli@syracuse.com)
Glenn Coin | gcoin@syracuse.comBy Glenn Coin | gcoin@syracuse.com 
Follow on Twitter
on May 26, 2013 at 7:55 AM, updated May 26, 2013 at 10:24 AM
Email
Once again, New York is charting new territory on tax breaks.
And that's not necessarily good news, say economists from both the right and left.
Several national economists say they've never heard of a plan like Gov. Andrew Cuomo's Tax-Free NY, announced last week. The program would give complete state and property tax breaks to businesses that open on or next to college campuses. It would even give their employees breaks on their state income tax.
"It doesn't exist in any other state," said Scott Drenkard, an economist with the pro-business Tax Foundation in Washington, D.C. "I don't know of tax-free zones like this that remove income tax from certain employees."
"I have not heard of anything like this before," said John Yinger, a professor of local public finance at The Maxwell School at Syracuse University.
For different reasons, Drenkard and Yinger both dislike the Tax-Free NY program, which would give qualifying businesses that move onto SUNY campuses a free ride - no property taxes, no corporate taxes, no sales taxes and no income taxes for their workers.
Drenkard said such targeted tax breaks make the tax system unfair and ultimately hurts, not helps, businesses.
"Carving out special tax breaks for certain favored businesses is destructive to the economic playing field," Drenkard said. "A much better option in the long run is to go with broader tax bases and as low a tax rate as you can make while still maintaining necessary government services."
The right-leaning Empire Center in Albany criticized the program for similar reasons.
Yinger says virtually all the research he has seen, and that he and his students have conducted, on targeted tax breaks shows they simply don't work -- especially those that hope to attract businesses in from other states.
"In New York we have a dizzying array of tax breaks with no evidence they help, and now here's a new version," said Yinger, who teaches courses in public budgeting and researches the effect of taxes upon behavior. "I think it would be just be another source of inequity in our tax system and would do nothing to help promote economic development. You'd do much better improving our schools and infrastructure than giving tax breaks to businesses who would be in the state anyway."
The state's new minimum wage tax credit program, also the first of its kind, was also criticized by economists for some of the same reasons the tax-free program is. That tax credit subsidizes the wages of teen-age students as New York's minimum wage rises over the next several years.
Under Cuomo's tax-free proposal, a business's tax-free status would last a decade. Workers would go five years without paying state income taxes. After that, their first $200,000 of income would be free of state income taxes.
Yinger said the income tax break for workers "looks particularly unpromising" as an economic development tool. He said that does little to help businesses -- other than allowing them to pay their employees less.
If passed by the New York State Legislature, the plan would put a total of 120 million square feet across the state into tax-free zones. That's equal to all the office space in Buffalo, Rochester and Syracuse combined, the governor said.
"It's big, it's bold," Cuomo told the editorial board of The Post-Standard and Syracuse Media Group. "I think it could make a major difference.
Cuomo said the program would have almost no cost to taxpayers because the majority of land in the program is not subject to property taxes. Plus, he said, these would be jobs that New York has been losing in recent years.
"This is a job you don't have now," Cuomo said. "And, just because the person doesn't pay income tax, doesn't mean there's not a revenue enhancement to that person getting a job in the state," adding the worker might buy a house, generate real estate fees, sales taxes and other spending in the community.
Cuomo's plan has received positive reviews from local business and economic development officials, like Rob Simpson, president of CenterState CEO, a nonprofit business development group.
"Turning those campuses . . . into economic engines and anchors for startup activities, I think it's a really important economic strategy,'' Simpson said."The tax free zones really offer a significant benefit to startup businesses that are coming out of these schools.''
Unshackle Upstate, a pro-business group, said it supports Cuomo's tax-free idea and hopes it mirrors the partnership between SUNY Albany's College of Nanoscale Science and Engineering and private companies.
"Governor Cuomo's Tax-Free NY plan will attract new businesses and much needed jobs to the Upstate region and also help end the brain drain that's plagued our communities for years," the group said in a prepared statement.
Locally, Sen. David Valesky, D-Oneida, and Assemblyman Al Stirpe, D-Cicero, also issued statements in support.
Still, some economists think giving property tax breaks to businesses makes it even harder for struggling cities to thrive.
"It seems like a positively bad idea for the mayors of the cities where the tax-free incentives will be implemented," said Kim Reuben, an economist with the liberal Urban Institute who recently attended a meeting with Syracuse Mayor Stephanie Miner about the problems of cities. "The limits on property taxes will be very tough for mayors in college towns like Syracuse who already face a limited property tax base, increasing pension costs as set by the state and property tax caps imposed by the state."

Contact Glenn Coin at gcoin@syracuse.com or 315-470-3251.

Staff writers Tim Knauss, Teri Weaver and Michelle Breidenbach contributed to this report.

(Source: syracuse.com)

No comments:

Post a Comment