Wednesday, June 19, 2013

Tax Free NY Insanity

Buffalo, NY---Recently, Texas Governor Rick Perry came to poach New York State jobs.  Governor Cuomo responded that his own Tax Free NY is far superior alternative.  


In 2012,NYS ranked third among the nations top ten for Gross Domestic Product (GDP) and ranked fourth highest in per capita income (PCI) according to the Bureau of Economic AnalysisThe two economic indicators are lost on critics complaining of high taxes in New York.  


ComparativelyNew York’s tax system has a close-to-flat tax structure overall accounting for income, property, sales and excisetaxes.  NYS manages to achieve one of the least regressive tax systems in the nation. Yet still, poor and middle income families in New York pay a higher share of their income towards taxes than wealthy families do. Therefore, NYS has comparatively high combined state and local taxes for poor and middle income families.


States that are revered for their “low” taxes are enormously high tax states for poor and middle-income families. The Institute on Taxation & Economic Policy (ITEP) verifies the ten states that have the highest taxes on the poorArizona, Arkansas, Florida, Hawaii, Illinois, Indiana, Pennsylvania, Rhode Island, Texas, and Washington.  


In 1936, Mississippi pioneered public subsidization to industrialize the nation’s poorest state.  The Depression had accentuatedMississippi’s poverty because of stubborn reliance on a colonial agrarian economic structure. Governor Hugh White’s proposal involved tax exempt bond financing backed by tax revenue forbuilding construction and land purchases to attract industries.  The pitch included buildings and land leased at submarket rates along with cheap abundant labor (e.g., ex-sharecroppers).  Ironically,critics protested calling the scheme "Socialism.”  


Virtually unconstitutional in every state, each created amendmentsto circumvent the law and the practice spread widely despiteresulting low economic growth. When subsidies expired, companies demanded more in order to retain jobs.  If demands were not met, then they closed up shop in search of the next big give-away.


There are over five decades of overwhelming evidence establishing the illegitimacy of this practice.  Public subsidies DO NOT generate economic growth or jobs as claimed. What we have learned issimple. Subsidization of business buys a "payroll" through a lien onproperty. Tax increases are certain for average taxpayers in order to finance Tax Free NY.


Tax Free NY is the "decisive" race to the bottom.  It does not create “new jobs”. It moves another state’s jobs to the Tax Free zone until the subsidy expires (e.g. IBM).  The College of Nanoscale Science and Engineering is prescriptiveThe lack of quaking economic growth in Albany-Schenectady-Troy, NY Metropolitan StatisticalArea does not justify replicating this model throughout the state.  


It is incongruous to hype an unfriendly business climate in NYSbecause of high taxes and then increase taxes for the average taxpayer so that a privileged few can pay nothing in a Tax Free zone.  

1 comment:

  1. Because once the subsidies expire, the companies may leave the state to go to the next state that offers the same "advantage" and eventually not one of the subsidized companies/employees will be paying taxes in New York State. Where does that leave the rest of us? Taking up the slack at a great burden!