"The more riddled a tax system is with politically motivated preferences, the less likely it is that business decisions will be made in response to market forces."
-Kail Padgitt, Tax Foundation
I recently met with a business consultant who helps local companies relocate to states with friendlier business conditions. Although her civic consciousness weighs heavily, her services are not without merit.
For many of these businesses, "getting out of Dodge" is the only option for long-term survival. And this condition isn’t confined to Upstate New York. Over the years, many Wall Street financial firms have moved their back-office processes across the river to New Jersey, hedge fund operations to Connecticut, call centers to India and executive suites to London and Switzerland. Why? New York is not a business-friendly state. Not yet, at least.
According to the 2010 State Business Tax Climate Index, published by the Tax Foundation, New York placed 49th out of 50-just ahead of New Jersey. In other words, there is only one state in the entire country with a worse business tax burden than New York.
New York also ranked next to last, just ahead of California, in Chief Executive’s annual survey of best and worst states for business when considering taxation and regulation along with other factors such as the quality of the work force (e.g., competitive wage rates) and living environment (e.g., real estate costs).
Without substantive change in Albany, it will only get worse. If New York’s government continues to foster hostile business conditions, more companies will be going out of business or migrating to other states. This can lead only to more job losses, continued emigration and further economic decline. New York is caught in a vicious cycle: The worsening business environment leads to a reduced tax base as businesses and people flee. The government then responds by raising tax rates, which in turn creates an even worse environment.
In today’s struggling environment, the status quo equals continual decay. Maintaining a high corporate tax and regulatory burden is clearly not the answer. We’re in an economic state of emergency, and we need triage to stem the bleeding. We need to cut taxes immediately and begin again to foster business success. From a budgetary perspective, this would require cutting expenditures and streamlining services while allowing our tax rates to stabilize. But how?
The answer is not easy. It requires taking a long, hard look at where state taxpayers’ monies go and publicly raising the critical issues that need to be addressed. We need to cut wasteful spending while protecting vital services. We also need to focus on job creation and fueling economic growth in ways that leverage our state’s abundant intellectual capital resources and eliminate the current form of corporate subsidies.
According to the Drum Major Institute for Public Policy, reports by the state comptroller’s office and independent organizations have uncovered widespread failure to meet job-creation standards in the state’s Empire Zones, industrial development agencies and other development efforts.
Specifically, New York needs greater transparency, accountability and control to ensure optimal business performance, measurable results and strengthened economic impact in exchange for business subsidies. We owe it to every hardworking citizen who weathers the economic storm yet remains loyal to our state.
In short, I am interested in ensuring that New York not only regains its competitive advantage but also thrives in the midst of a shifting national and world economy. I am not interested in supporting a state budget that benefits select groups; I am interested in putting strong fiscal policy ahead of politics and making New York a state that actively welcomes and encourages, rather than cripples and discourages, economic and entrepreneurial activity.
Mary Wilmot is the Democratic state Senate candidate in the 55th District.
10/15/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail email@example.com.