Fri May 24, 2013
Cuomo's Tax Free Zones Draw Mixed Reviews
Governor Cuomo has been traveling the state promoting a plan to allow new businesses to go tax free for up to a decade if they locate near a State University campus. The plan, which is yet to be drafted into bill form, has raised some questions.
Governor Cuomo has been to several key upstate cities in recent days, promoting a plan to declare tax free zones around state college campuses, in hopes of attracting new businesses.
“Which are 100% tax free communities that will be located all across the state of New York,” he told an enthusiastic crowd in Albany, at a Nano tech center adjacent to the university.
Later, speaking to reporters in Buffalo, Cuomo says he hopes his “zero tax” zones will be a big solution for a big problem, the decades- long decline of the upstate economy.
“There would be no place in this country that they could go and pay less taxes than they would pay in these areas,” Cuomo said.
Business groups have been generally supportive. Brian Sampson, with Unshackle Upstate, says it could help end the “brain drain” that’s plagued the region for years, and have some positive ripple effects on local economies.
“Those people are going to need to rent apartments, buy homes. They’re going to start frequenting the supermarkets , the restaurants, ,” Sampson said. “So you’re going to see an uptick there.”
He says as the new businesses become more established, they will also need a supplier base, which will trigger even more new companies.
But Sampson says ultimately, more needs to be done to retain the businesses that are already here, and struggling with the state’s high taxes. He says across the board cuts in the corporate tax rate, incomes taxes, and workers’ compensation costs, among other things, would ensure that any current or new businesses really do remain in the state.
“We hope that what we don’t see is the governor and the legislature clapping their hands, wiping them ,and saying ‘we’re all done here’,” Simpson said. “This a piece of the puzzle. But the puzzle isn’t put together yet.”
Others have strong misgivings.
The largest state worker union, the Civil Service Employees Association, calls it “corporate welfare” and a “tax giveaway to business at the expense of local communities and middle class jobs”.
Ron Deutsch is with New Yorkers for Fiscal Fairness, a coalition of unions, environmental and social justice groups. He says the two tiered tax system creates an unfair economic playing field for already established businesses who will need to compete, and imposes a greater burden on existing taxpayers.
“Even they’re in a tax free zone, they’re still going to require police service, fire service, sanitation services,” Deutsch said. “While they’re not going to be paying any taxes, the rest of us are going to be picking up the bill.”
He says the plan reminds him of the failed Empire Zones created by past governors. The widely discredited economic development program tried to foster new business in disadvantaged areas, but instead became a favored tax break for politically connected companies.
“It’s just a rehash of old programs and old ideas that, quite frankly, have never worked,” Deutsch said.
Cuomo, speaking in Syracuse, says his zero tax areas are nothing like the old Empire Zones, which he called a “complicated scheme”.
“I don’t believe the Empire Zone program was well administered, and I think there was a lot of fraud in the program,” Cuomo said. “And that won’t happen here.”
He says his plan will be modeled on other successful tax abatement programs in other states.
Many of the details about the plan have not been released yet, including the exact criteria to qualify for the tax breaks, though Cuomo has said the companies must be linked to the mission of the specific college campuses. A bill has not yet been released.
Major party legislative leaders appeared with Cuomo for the announcement, but have not yet completely committed to the plan. The governor is expected to push for the proposal in the remaining four weeks of the legislative session.