Cuomo trying to boost upstate New York’s economy with sweet new “tax-free zones”
posted at 4:41 pm on June 5, 2013 by Erika Johnsen
Liberals’ highly selective attention in choosing when to recognize that lower taxes and fewer regulatory barriers to entry do, in fact, help to spur economic growth and create jobs, never ceases to amaze.
The state of New York is a hot mess of over-regulation and terrible anti-growth policies and New Yorkers pay the highest taxes in the country (the Mercatus Center has New York ranked as the absolute worst state in the union for personal and economic freedom, yikes). Gov. Andrew Cuomo, perhaps realizing that he needs to make a change to the deep-blue playbook dragging on growth in the upstate region, is proposing to create “tax-free” zones around universities; new and existing businesses that open up shop near the campuses will have to pay neither corporate nor property nor sales taxes for a full decade, and both owners and employees will not be subject to any state income taxes. The Financial Times reports:
“By tax-free, I mean really, really tax-free,” Mr Cuomo said last week as he toured the state to promote the plan.
The plan comprises 120m square feet of space on and around dozens of State University of New York campuses and a number of private colleges, all outside Manhattan.
It is Mr Cuomo’s latest attempt to jump-start the sluggish upstate economy by encouraging growth in the tech sector and changing New York’s reputation as a high-tax environment. …
“If you just reduced the loss of jobs, that would be a home run. We create start-up businesses. Right now we just can’t keep them,” Mr Cuomo told the Financial Times. “They get their legs under them, so to speak, then they leave for a lower-tax environment.”
Wait — so businesses that have the option of packing up and moving to a new location to save themselves money, will often do so? You don’t say. And while it’s perhaps nice that Gov. Cuomo can recognize that the state’s economically soul-crushing policies are pushing out jobs, businesses, and residents, this “tax-free zone” proposal is really just a tease about the more substantive types of changes the state should be making, and not at all a long-term nor effective fix. Says Scott Drenkard at the Tax Foundation:
This plan is interesting for a few reasons. The first is that it is an implicit acknowledgment that taxes matter for business location decisions. The second is that it is an implicit acknowledgment that New York’s tax system is indeed uncompetitive.
While both of these priors are true, this plan goes about trying to fix them in an inappropriate way. By just lowering taxes on a particular type of business operation (in this case, start-ups on campus) the administration is trying to direct the creative power of the market from the statehouse. This approach, while couched in sexy terms of promoting an “epicenter [of] nanotechnology,” is actually antithetical to what makes for innovation.
Innovation comes from many small efforts on the part of entrepreneurs, only a few of which take hold and are profitable. The whole point of a market-based economy is that people do not know what will be valuable to society until they try it. Cuomo’s plan, by contrast, takes this discovery process out of technological advancement and only gives preferences to tech companies that partner with higher education institutions. Nanotechnology is great, and so are university research programs, but economic growth and innovation come from all sectors.
I find it painfully hilarious that state and national Democrats and the Obama administration continue to insist that we add more regulations to our rulebook, that we tax wealthier individuals and businesses at higher rates, and that we issue still more government “incentives” for favored businesses; but even when they can openly admit that higher taxes are an uncompetitive drag on economic growth, they try to fix it with ineffectual band-aids like this one.