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October 1, 2014
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Opinion

Guest Commentary: Governor’s 2014 plan will not help business

Tossing his “heads I win, tails you lose” coin, Governor Andrew Cuomo recently outlined his legislative agenda for 2014 that included gambling among its many economic panaceas. More importantly for the economic future of New York, the governor’s agenda correctly, but not completely, identified problems for businesses struggling to survive here. Unfortunately, his agenda fails to address the real reasons that New York is a lousy place to do business.

The agenda proposes reductions to corporate tax rates, refundable property tax credits for upstate manufacturers, a miniscule reduction in energy costs and estate tax reform. It also proposes attracting international businesses which, like last year’s START-UP NY, will be paid for by the poor businesses and taxpayers already in the state.

As the worst state for business taxes, New York ranked 25th in corporate taxes and 49th in individual taxes, according to the 2014 Business Tax Climate Study by the Tax Foundation. Keep in mind that most small businesses — single proprietorships, partnerships, corporations and LLCs — pay taxes at the individual rate.

New York also ranked 38th for sales taxes, 45th for unemployment insurance taxes and 45th for property taxes. All these taxes, including property taxes, are controlled at the state level and could have been addressed by the governor. Once the Albany pay-to-play bureaucracy is included, the governor’s plans hardly make the state a better place to do business.

Taxpayers already pay a huge price to attract businesses. According to The New York Times, state corporate grants given to industries and firms were $4.1 billion in 2012, adding $210 to each taxpayer’s bill, on average. Included are incentives to non-New York film production
companies, which the Manhattan Institute for Policy Research equates annually to the cost of hiring 5,000 teachers. Just as for Presidents Obama and Clinton, the road to a “President Cuomo” depends on support from Hollywood.

Businesses grow where entrepreneurs and executives want to live. The buzz of New York City is exciting to young entrepreneurs, but once the business has passed from the idea stage, the actual costs of doing business in New York and the difficulty of recruiting quality employees can drive companies away. The combined impact of employee availability, location desirability, taxes and the cost of operation in a specific location could mean life and death for a precarious startup.

How can I recommend that my students start businesses in New York under such adverse conditions? The governor, like other career politicians, cannot understand the emotional toll it takes to be a risk-taker and start a business, of worrying about making the payroll and fighting constant battles with bureaucracies. Once a company has scale and shareholders, unless that business needs to be in New York for strategic purposes, it may have a fiduciary responsibility to leave the state.

If one believes that Governor Cuomo’s proposals will make any difference in the likelihood for businesses’ success in the state, he or she has probably joined him in puffing on that medical marijuana also added to his 2014 agenda.