June 12, 2013
Gov. Andrew Cuomo released legislation outlining his plan for tax-Free zones on Monday after spending a week in May touring upstate to build support for the proposal.
“I mean no taxes. That’s what I mean when I say tax free – no business tax, no corporate tax, no franchise fee, no income tax," Cuomo told officials at the University at Buffalo.
Under the measure, any new business that sets up on or near a SUNY campus, or at selected private universities or state-owned properties will pay no taxes for up to ten years. After five years, high-wage earners will have to pay income taxes. The locations are mostly upstate.
The plan has come under fire from all sides.
“I think tax free zones are a horrible idea right now," said Ron Deutsch of the left-leaning New Yorkers for Fiscal Fairness.
"I think that these programs have been tried in the past. We’ve called them empire zones, job incentive programs, we know through history that these simply do not work.”
Like previous programs, Cuomo says Tax Free NY is aimed at both bringing in new business from out of state and at encouraging startups from within universities. To qualify for the zones, companies would have to be connected to a college doing similar work.
One of the state’s public employee unions released a radio ad calling the program a giveaway for a select few.
Cuomo addressed this critique during a stop in Syracuse. He pointed to tax credits for manufacturing and for film production as other uses of the tax code to support certain businesses.
“Yes, welcome to the tax code in the State of New York. Welcome to the tax code for the United States of America that has winners and losers," said Cuomo.
Dozens of upstate officials have signed on as supporters of Cuomo’s plan, despite the potential loss of local tax revenue.
And Tax Free New York would just be the newest in a long line of similar state programs to foster economic growth.
A recent report by the left-leaning Alliance for a Greater New York looked at 15 economic development schemes that used public funds like tax breaks or state grants.
According to the alliance’s executive director, Matt Ryan, there should be close scrutiny of what sorts of benefits come from the governor’s new program.
“When you get past the press releases about job creation, most New Yorkers are left in the dark as to whether or not we’re getting community benefit from these public investments,” said Ryan.
The group’s report, called “$7 Billion Wager” examined the reporting requirements of 15 economic development programs such as Empire State Development and the now-defunct Empire Zones. It found that only 3 programs had clear job-creation requirements and only 3 required companies to pay back state money if they failed to create the promised jobs.
And eliminating taxes may not be enough to keep a startup from leaving.
Rhett Weiss is the executive director of Cornell’s Entrepreneurship and Innovation Institute. He says there are many other factors that make companies leave when it’s time to grow.
“Because they see that the jobs or the startup scene may be someplace else," says Weiss.
"It may be in the Silicon Valley or New York City is really exploding with it, the Boston area, the Washington, D.C./Northern Virgina/suburban Maryland area, Austin, Texas.”
Weiss says those places aren’t low cost, but they’re attractive to startups because of access to capital and because companies have clustered there already.
“You don’t just have a big conference, invite a lot of people and they get like turned on to your community and think, this is great, I’m going to stay here,” says Weiss.
Weiss added that New York needs to look closely at what companies need to stay, and providing those things could be an expensive investment.