Business Buyers Beware: Gov. Cuomo's "Tax Free" TV Pitch is a Con Job

Posted: Feb 19, 2014 12:01 AM
Business Buyers Beware: Gov. Cuomo's "Tax Free" TV Pitch is a Con Job

WASHINGTON - New York Governor Andrew Cuomo is airing TV ads around the country that offer tax-free status for 10 years to new business start-ups entering his state.

The ads' claims are deceptive because they come with a lot of government strings attached. You only get a tax cut if you put your business where the state tells you to put it, plus meet other state requirements. Critics say Cuomo's sweeping claims are not what they're cracked up to be.

Once again, not unlike President Obama's tax credit proposals, the Democrats think they can dictate the rules that produce successful businesses and lots of jobs. It did not work nationally, and it isn't going to work in New York where, after Cuomo's first three years in office, the statewide jobless rate remains over 7 percent.

In New York City, unemployment is a recession-leaning 8.1 percent.

"Will Gov. Cuomo ever stop with the tax gimmicks? Our beleaguered state economy needs more than political plans that pick winners and losers," the New York Post lectured the governor last month.

The exaggerated claims in Cuomo's "Start-Up NY" TV ads do not to reach out to major retail and wholesale firms, or medical service businesses and many other business sectors. Instead his tax cut plan focuses on high-tech and manufacturing companies that must locate their firms on or near predominantly "upstate" university campuses.

Moreover, businesses that qualify could lose their tax-free status if they do not produce the required number of jobs under Cuomo's program. "And the program Cuomo called 'bold' is limited to just 10,000 jobs -- one tenth of a percent of the private-sector jobs in New York," the Post said.

In another blistering critique last week, Americans for Tax Reform, an anti-tax lobbying group, said "Cuomo is blowing smoke" on his tax cut claims.

"A closer examination of Gov. Cuomo's proposed tax changes reveals that in most cases, they would not result in a net reduction in New York's state and local tax burden," they said.

In fact, upon closer examination of the tax plans' details, it is shifting of tax burdens, rather than reducing tax rates.

E. J. McMahon, who heads up the Empire Center for Public Policy, has testified that more than half of Cuomo's proposed "tax cuts" in property tax relief are actually "a tax shift. That is, they take a levy that is being assessed on the local level and shift it to the state level," ATR said.

Cuomo came into office by declaring that the state had to "change the perception of New York as a high tax state." And he's won some praise in certain quarters just for suggesting that the state's economic problems are the result of its oppressive, job-killing tax levels.

The non-partisan Tax Foundation's State Business Tax Climate ranks New York last out of the 50 states. It's top income tax rate for individuals is 8.82 percent, the second highest in the country.

He named a bipartisan panel led by former Gov. George Pataki, a Republican, and former State Comptroller H. Carl McCall, a Democrat, to propose a tax reform plan that has received mixed reviews.

What's missing in Cuomo's plan to get New York's job-challenged economy growing again, says Americans for Tax Reform, is a flat out reduction in the tax rates across the board.

"If Gov. Cuomo is serious about lowering the tax burden on hardworking New Yorkers, he should take steps to lower both the individual and corporate income tax rates," ATR says.

And he should entirely phase out the "Millionaires Tax" that he pushed through the legislature in 2011 which the the state Assembly's Majority Ways and Means staff said was an "unsustainable" revenue source.

Cuomo's plan calls for lowering the death tax from 16 to 10 percent, but that will still leave New York "as only one of 14 states that imposes any tax on the value of property and assets left to others as a result of dying," ATR says. Better to phase it out entirely.

In many respects, his plan is less of a tax cut to help create jobs than a political strategy to help him appeal to upstate voters, where he is weakest, in the fall election.

A Quinnipiac University poll shows him with 76 percent support in New York City, but 49 percent support among upstate voters where the state's manufacturing industry is struggling.

Cuomo should take a page out of the tax cut plan that was enacted by New Mexico's Gov. Bill Richardson who advised his party that "we have to be the party of growth and the American dream, not the party of redistribution."

Richardson, a two-term governor between 2003 and 2011, saw that the surrounding states levied income tax rates that were much lower than New Mexico's. He cut taxes across the board, slashing the top income tax rate from 8.2 percent to 4.9 percent over five years.

Not all of his tax changes and, especially, his spending policies were right by any means. But his economy grew, and Inc. Magazine gave him a four star rating for his pro-growth tax cuts. He created thousands of new jobs and balanced his budget, to boot.

But outside of New Mexico, Richardson's tax cuts were politically unpopular with liberal Democrats when he ran for president in 2008.

I recall a campaign speech he delivered at a Democratic National Committee event in Washington where he touted his tax cuts, only to hear a murmur of hisses in the room.

Barack Obama, with dreams of enacting higher income and business tax rates to bankroll his big spending plans, won the presidency. And we see the result in a sluggish economy, weak job growth, and shrinking labor force.

Cuomo is betting that his tax plan will help re-elect him in November and put him into a position to seek the White House after that.

But it's going to take a lot more than slick TV ads and devious, tax shifting gimmicks to erase New York's anti-business reputation as a high tax, high unemployment state.