EDITORIAL: Now you see taxes, now you don’t

GOVERNOR CUOMO PLANS to kiss a bunch of frogs. He hopes a few of them will turn into princesses who create new jobs statewide. The fairytale has the princess kissing the frog, but the idea’s the same: If you can keep yourself from gagging on the details of the process, maybe magic will happen.

The plan’s key ingredient is the SUNY system, the county’s largest state university, with nearly half a million enrolled students at 64 campuses, among them Columbia-Greene Community College in Greenport. If the legislature adopts it, the governor’s new program, called Tax-Free NY, would suspend all state and local taxes for new businesses that set up shop on or next to a SUNY campus. Don’t like state business tax? F’geddaboudit for a decade. Personal income tax? It’s history for workers hired by firms cuddling up to a SUNY campus… for the first five years, anyway. Sales taxes too–gone with a wave of Albany’s magic wand. And property taxes.

In theory the tax-free incentives convince businesses to create new jobs. The unemployment in the county was 6.4% last month, but the statewide rate was a point higher, slightly above the national average. Businesses remain skittish about hiring as the federal stimulus program–which boosted employment–dwindles, and now the mindless sequester is beginning to bite.

So the governor and his advisors have introduced tax incentives, attempting to replicate the success of the College of Nanoscale Science and Engineering at the University at Albany, which is reportedly awash in funding and surrounded by packs of venture capitalists drooling to invest in the next big thing, which is very small (nanoscale) stuff.

But wait, what was that last item on the list of taxes lost in pursuit of jobs? The property tax? Are they serious? Do the great minds in Albany think that entrepreneurs are stupid. People with good business ideas know that they won’t be able to attract and retain the talent they need if the schools and municipal services in the surrounding communities are locked in cycles of cutbacks and decline. They know those services and infrastructure are supported in large part by property taxes.

Do the people who come up with these brilliant ideas live in another state? Do they commute from a different planet?
If the governor wants to live with the consequences of lowering corporate tax rates as a way of stimulating the economy, he deserves credit for bold thinking and the legislature should give the idea a try. But denying municipalities the traditional benefits of an expanding tax base without some way to offset the loss of that revenue amounts to just one more time the state tells homeowners: This will help you once you pay for it.

New York didn’t suddenly discover tax incentives. The New York Times calculates that the state currently spends more than $4 billion annually on business tax exemptions. Some of that money trickled down to Columbia County over the last decade. One of the companies that benefitted, according to The Times, was Kaz, a Hudson manufacturer listed as receiving over $333,000 in property tax abatements. Kaz has moved its plant to Mexico; a new company now occupies the plant.

Tax-Free NY is the son of something called Empire Zones. An Empire Zone was designated for Hudson and eventually stretched to Ghent. The Empire Zone program was conceived with the best of intentions but it had the unintended result of encouraging industrial developers to game the system, creating fictitious jobs and touting dubious benefits. Not long ago the state terminated Empire Zones and now, from the ashes comes the Tax-Free NY program.

That’s the dilemma Mr. Cuomo faces. Voters and taxpayers demand that he deliver results in an economy not of his making. So he tries to please us even though he knows that when New York lures companies here with the promise of no taxes it won’t be long before another state (or country) lures them away with the promise of no taxes plus free hot chocolate.

Let’s hope the governor is successful in leveraging the SUNY system to create jobs and prosperity, as long as he does it without regressive effects on property taxes.  But Mr. Cuomo should keep in mind that what makes our state university system so economically attractive is not the absence of taxes but the presence of so many people engaged in thinking. If you spend more to develop our human capital, investors and jobs will follow.

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