It has long been said that New York State is a difficult State. High taxes, cold winters, plus an exodus of jobs and population have combined to devastating effect. For 50 years New York has lost businesses and population to other States, prompting Gov. Andrew Cuomo to create START-UP NY. The concept was to draw new businesses to the State with tax exemption, but the plan may not be as well thought out as it was hoped to be.
An example of the benefit, and consequences, of START-UP NY and the continuation of high tax rates can be found in Binghamton, NY. It was once a thriving city home to manufacturers located in the Southern Tier of the State. It is now saddled with 6.7% unemployment (preliminary July 2014) – which exceeds the unemployment rate of the State. But the problem is growing.
On July 29, 2014, it was celebrated news that 5 businesses were coming to Binghamton. Less celebrated was the fact that the total number of jobs to be created were 80. Also generally unmentioned was the fact that these 5 business start-ups will not pay taxes in the State of New York for 10 years. Gov. Cuomo took the opportunity to highlight the program responsible, START-UP NY. He stated at the time,
“Governor Cuomo called it a “game-changing move” in regard to NY State’s business climate.”
Another part of the “game-changing move” was publicly announced September 23, 2014. PepsiCo released the news that it will close its beverage storehouse in November. The number of long-term jobs lost may be as high as 74. Add to this the $610,000 in 2014 that may be lost from the assessment on PepsiCo’s building in Binghamton, NY. PepsiCo has not yet announced its plans for the soon to be vacant building. Six years earlier Coca-Cola had closed its Binghamton location.
The cause of the loss of PepsiCo? Economic reasons was stated in the NY Department of Labor filing. New York ranks 50th in business friendliness, with personal, property, business, sales and unemployment insurance taxes all ranked among the worst half of all States. A situation that has persisted for years. Binghamton alone has lost 9,700 businesses since 2009 according to the U.S. Bureau of Labor Statistics. But Gov. Cuomo believes that 5 start-up companies, some in the unproven fields of energy storage and others in the crowded field of Wi-Fi, will change the game for Binghamton, and New York.
Success can be difficult to measure in some cases. Success for a business is usually profits, and potentially growth. Success for a State is in part higher revenues due to taxes on growth and profits. Binghamton is the high-stakes bet of Gov. Cuomo that losing taxes will result in new business growth even as established business departs with its history of jobs and taxes.
The future is unknown. Yet, the strategy to give up on older established businesses to accommodate unproven new companies is controversial, at best. To date it has yet to improve the business friendliness of New York, and evidently has not stopped the outward flow of business from New York.
Thus questions should be asked of Gov. Cuomo. Since START-UP NY has had minimal impact on jobs, but a bigger long-term tax footprint that affects all of New York, isn’t it time to adjust the strategy? Perhaps some effort to lower taxes and/or the over abundant number of regulations (that combined have consistently keep New York at the lowest ranks of business friendliness) could spur job growth and nudge NY from the bottom of the rankings? These are questions that Gov. Cuomo seems unwilling to address.