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START-UP costs

When Gov. Andrew Cuomo’s Tax-Free NY plan was rolled out this spring, supporters said little or nothing about what the program might cost. The implication was that the plan would draw only companies that otherwise would not relocate or expand in New York.
The memo attached to the rebranded START-UP NY legislation said only that starting in fiscal year 2014-15 "there is a potential ‘loss’ resulting from forecasted future revenue growth."
The bill, the memo added, "does not include any direct costs to the state."
Little more than a month after Gov. Cuomo signed the bill into law, however, his Budget Division acknowledged that START-UP NY would indeed reduce growth in state tax receipts-and tax officials produced specific cost estimates.
In the three fiscal years ending in March 2017, state budget analysts estimate START-UP NY will reduce expected tax receipts by $68 million, $105 million and $150 million-a total of $323 million.
But the program allows eligible businesses and their employees to avoid paying an array of state and local taxes for a decade, so $323 million clearly is not the full cost. (Nor does it account for the impact on local government finances.)
When the governor and legislative leaders announced an agreement on the START-UP NY legislation, Mr. Cuomo said, "we desperately need to jump-start the upstate economy, and these new tax-free communities will give New York an edge like we’ve never had before when it comes to attracting businesses, startups and new investment."
Count us among a skeptical minority that has doubts about a program that favors relatively few businesses-out-of-state firms, startups and a limited group of others willing to locate in "tax-free communities" at SUNY campuses, some private universities and "strategically located" state-owned properties. As we asked before the bill was passed, if New York’s problem is onerous taxes and regulations, why not reduce them for all businesses?

Others clearly think START-UP NY will do great things for upstate. Let’s hope they are right. But New York taxpayers should not be told what such legislation is likely to cost only after it is enacted.

8/9/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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