Interesting idea proposed by Gov Cuomo of NY

Wayne – It is a good idea on the surface, but are taxes the problem, or is the government spending in the state the problem? I read the article. The only thing I saw related to decreasing spending is to cut out the $440M tax subsidy for film and television production. The article doesn’t say, but I am curious why the City University of New York campuses aren’t included. This may ultimately lead to the “It is not fair!” crowd coming out in full force. After all it has to be fair…or so the entitled mind thinks.

Getting rid of the tax subsidy for film and TV may have an impact on the economy, but I speculate it would have only a little. I base my opinion on the lure of the New York area, whether statewide or the Big City. The lights and historical aspect of the state would not be enough to make people stop filming there. Just like people would up and leave L.A., Hollywood, etc.

I hope it gets passed for the folks that want it passed, especially people paying state income tax on their wages. Why does New York need so much of its peoples’ money?

Tennessee, where I am, doesn’t have state income tax on wages, I am thankful for that; the Feds get enough as it is.

It's a 100% proven fact that the economy works best when central planning picks winners and losers. So, if college towns are the designated winners and nearby or even not so nearby towns lose, it's all for the greater good and that good ought to be great enough for anybody!

Everybody knows college towns are special and need the most help.

How do I know this is a good idea? Because politicians and political appointees of all parties are the smartest, most productive, and least corruptible members of society. That's why America has the simplest and fairest tax system in the world.

That much is obvious.

Further, I can see no unintended consequences from this plan as employers never shift in previously unimagined ways to adapt to changes. I mean, who would vacate one town to move to the next town over to avoid paying a boatload of taxes? That is crazy talk.

In closing, I am so relieved to read that New York's economic problems are now over. Phew... close one.

Bad idea, not only for all the reasons Anon describes but for many others as well. The gov ignores or at least fails to confront excessive taxation and spending, root cause issues. It is a lipstick-on-a-pig solution to the state's lack of competitiveness.

So what I'm hearing are that Economic Development Zones and Industrial Development Agencies are bad ideas then...

Sure Chris. There are multiple places to start:

1) Should government take specific actions to incentivize business. All US State governments do (and most foreign governments as well) - regardless of political party. Are they fair and even handed - rarely. Do they work at times - yes they seem to work related to keeping jobs local, attracting and retaining business, growing local business communities. Are they a zero sum game - probably - I'm not sure the worldwide economy as a whole actually gets bigger based on these types of incentives. However incentives for businesses are standard operating procedure. Ideally they are the least distortive possible - so something that is a time limited incentive (first xx years) and that is clearly visible (not a subsidy) is better than other long term distortions. On this point Gov Cuomo's suggestion seems like standard practice and an attempt to do something for business in his state.

2) The second thing government's do related to incentivizing business is focus on what types of business. Big business almost always gets a deal (every state in the country does this). If you are thinking about the types of jobs you want, or want to keep, what types of jobs are those. Technology is closely tied to university - research, talent, new ideas, young energy. If you want to create technology jobs this is a good place to start. Or, possibly, you are looking to locate business around a university to employee graduates - keeping educated people in the state. You could make a case for keeping employable talent in the state generating long term benefits for your state.

Businesses would only start in these locations if they can be successful (access to markets, staff, resource, logistics) - so hopefully companies will not start there if they have no chance to succeed. The risk to the government is in lost tax revenue - which may be offset by increased economic activity. That is a confined upside risk - and not an unknown downside risk.

So - when compared to doing nothing to attracting business this appears to be a positive step. NY has chosen to be a bigger government / higher tax state - and they still have a vibrant business environment including the financial capital of the US. Given where they are starting from and who they want to be - this seems like a fairly standard twist on standard government business promotion strategy.

Thanks again, Bob, for responding. There is definitely risks and rewards in this situation not only for the government, but for the businesses also. It could pay off well if it is executed well.

I have seen in Knoxville, where I live and work, how big businesses have received deals, many of them include payments in lieu of taxes for so many years. It has helped tremendously by bringing companies to Knoxville. Just over a year ago, Knoxville was ranked as one of the 10 fastest growing U.S. Cities according to CNNMoney (April 5 2012). I think it is mostly due to the fact that there is no individual income tax, death tax, as well as the beautiful area.

Mentioning universities also, in Knoxville we have the University of Tennessee Medical Center, which is ranked pretty high in medicine. There is a new proton therapy center being built right in Knoxville to service cancer patients through this therapy. When it is finished it will be 1 of 14 in the nation. A lot of research, talent, and new ideas in medicine are happening here through UT Medical Center, which may provide employees for the proton therapy center, as well as other medical advancements.

It will be interesting to see what the people of NY decide regarding this idea.
Something about New York, and California for that matter, I am unable to understand is how these states can be a bigger government/higher tax states and both be vibrant in business and culture.

Thanks again for your comments. Perhaps others will join in the business side also to discuss the benefits or hindrances with a proposal like Gov. Cuomo's.

Hi Chris. It is a topic that challenges fixed political positions - reality often does on both sides.

California has two world class (as in top in the world) industries - Technology and Entertainment. There are other parts of the world where both exist - but I would propose any fair evaluation shows us still as the clear leader. We are also the 8th biggest economy in the world. All disparagements about California from outsiders aside - and all current problems aside - California has many successes.

Some of those are based on culture - something disparaged as often as our tax models. There were some interesting studies in the early 1990s about why Silicon Valley beat out the Boston area for clear leadership - and most of those pointed to a less hierarchical corporate management structures and a more open / free-wheeling environment as the keys to our success. It may be the types of people who work in those industries, or the types of culture they want, or the types of lifestyle they want, or their belief or value system. If you take a look at the Technology Centers in the US you will notice they are in blue areas and not red. You could draw conclusions about that.

Most of the current studies on Silicon Valley say it is the ecosystem that generates the success – the investors, legal/accounting know how, engineers / scientists, mobility/built in knowledge base, entrepreneurs, our tolerance for creative destruction and change, and so on that make our area the major leagues for tech companies. You’ll notice that taxes do not come into that equation at all - either because they are not a major cost or because most clever companies leverage the loopholes in the tax code.

We are also extremely international – we are interested in the best talent regardless of where it comes from. Silicon Valley people are over 40% of Asian ancestry, less than 40% Anglo, and the rest of Hispanic/African American or other nationalities. We already look like the world – we compete around the world (huge export source for the US) – and we don’t close ourselves off from the rest of the world.

I have been an executive in three technology companies – including the current one I co-founded. Two of them were in Virginia – and my current has been in California since it’s inception. Personally I can tell you taxes are something I think about around year end and to plan during the year – but they are inconsequential for business strategy. My business concerns are more about finding the right people, accessing the right markets, what the local cost of living is for everyone (housing more than taxes), education opportunities, and where I want to live – all of these are far more important than a few percentage points in taxes.

For those who don't live in NY, the biggest offender of taxing authority is not the State, the Cities, Towns or Villages (although if they learned how to properly run these entities they could be out of debt/lower taxes), it is the School Districts.

I pay over $7,000 a year just for my School District and it goes up every year with the same arguments. The sad part is those of us who are not users of the Schools fail to voice our concerns and vote NO on those same budgets.

But, even if we did, the laws have fall-back provisions that cause the budget to go up regardless... Catch 22...

Wayne - CUNY is a public system. It's dual funded by the City and State (check out link to their site below).

http://www.cuny.edu/about/administration/offices/bf/ubd/faqs.html

Passing this bill which excludes a large group of NYers while favoring another group will draw some criticism. Imagine no income or property taxes in these zones in the Five Boroughs. It would be an automatic pay increase for faculty, which would attract talent. Corporate parks could form around campuses like Baruch, Queens College, City College. The CUNY system would get a nice boost.