Manufactuing tax cuts might not mean more jobs

MTAPhotos via/Flickr
January 14, 2014

It’s no secret Upstate New York has been losing manufacturing jobs for decades. The state has been offering incentives to encourage the industry and bring jobs back. The latest -- Governor Cuomo proposed to eliminate the income tax for manufacturing companies.

The list of manufacturing companies laying off their workers in Upstate New York is pretty well known – Kodak, General Electric, IBM, Carrier Corporation, Bausch and Lomb.

Recently in Broome County, it was Endicott Interconnect. Nicole Ponzi is a former manager at the Endicott plant. She says she wasn’t surprised when she lost her job.

“In 2010, a couple of the big contracts were lost and myself along with approximately 150 other employees were let go... I hate to say it, but everybody knew that it was coming."

Like a lot of people in New York, Ponzi had to find another job. More than 12,000 New Yorkers lost their manufacturing jobs just in the last year. But Governor Cuomo is trying to combat that trend.

During his State of the State address, Cuomo proposed to get rid of a tax for all upstate manufacturing companies.

“We need manufacturing jobs in upstate New York and let’s cut the corporate tax in upstate New York to zero all across upstate New York, period. Why, because you cannot beat zero, my friends.”

The corporate income tax is levied on the profits a company makes. Right now, it’s just over 3% for upstate manufacturers and Cuomo says this tax cut will provide $25 million in tax relief.

But will that be enough to create new jobs?

Scott Andes with the Brookings Institution, isn’t so sure.

“It’s pretty unlikely that you’re going to have a company that would create a job opening because they save on their state corporate income tax, frankly.”

He says the money saved from a 3% tax cut isn’t trivial, but it’s not significant enough to create new positions.

What’s more, many small manufacturers don’t pay the corporate tax in the first place. Instead, business owners pay tax on their personal income, so they wouldn’t even be affected by Cuomo’s proposal.

Andes says that for a long time, manufacturing jobs were moving to southern states. So to try and bring them back, states compete against each other to lure companies from other states. But, here in New York, we already have one of the lowest corporate income tax rates in the country.

“Is $25 million in saved revenue for the state of New York really going to induce a lot of manufacturers moving from Pennsylvania? Maybe. Maybe not.”

Instead, a big factor for companies deciding to move is transportation costs. But, Andes says seducing companies from within the US is just a bad idea for the overall economy.

Instead, he says a revival of the manufacturing industry upstate would be based on a long term approach.

“There needs to be a clear pipeline for people to leave the K through 12 system and get skilled in what’s needed in the manufacturing sector," says Andes.

Cuomo has supported initiatives that fit the bill, like promoting partnerships between schools and private companies in science and technology. Or like Start UpNY that creates tax-free zones for new businesses around universities.

But back in Endicott, Nicole Ponzi says the Southern Tier is still starved for manufacturing growth.

“The area needs a pick up," Ponzi.

After she lost her job at Endicott Interconnect, she got another manufacturing job. But when her contract was up, she switched fields – now she’s selling real estate.

But for right now, nothing’s set in stone. Governor Cuomo still has to present his budget proposal – which includes the manufacturing tax cut -- to the legislature in two weeks.