Tax Analysts Blog

Worst Tax Idea of the Year? Cuomo Wins by a Landslide

Posted on May 29, 2013

An ideal tax system is based on a broad base and low rates. At least that is what the thinking folks believe. An ideal tax system also treats similarly situated people and organizations the same. People concerned about fairness have always thought that. And an ideal tax system minimizes economic distortions. Now politicians of every stripe violate that ideal every day. Personally, I think politicians violate this idea because 1) they arrogantly want to dictate their views on the rest of us, or 2) they want to enrich their friends.

As we reach the mid point of 2013, the worst example of political destruction of tax policy ideals comes from New York and Governor Andrew Cuomo. New York still faces relatively high unemployment, around 7.8 percent. Many parts of the state, particularly outside the city, are economically depressed. And my friends at the Tax Foundation remind us that New York has the worst business tax climate in the world.

Such a dire situation requires action. And the governor is nothing if not a man of action. He would like to create something called Tax-Free NY. His idea is to lure start up companies on college campuses through tax free incentives.

Not everything, everyone, or everywhere in New York will be tax-free. The tax-free communities will be all of the state universities (and curiously a number of private universities) outside New York City. Companies that open shop in these communities will be exempt from sales, income, and property taxes. That’s better than living in New Hampshire. Better still, employees who work for businesses in the new tax free communities will be exempt from paying state income taxes.

So if you are in the community you don’t pay tax. If you are outside, even by six inches, you do. The state will determine which companies are eligible (apparently the governor has already said no retail establishments will be welcome in the tax-free community). That is exactly what we need, state bureaucrats determining which companies are best suited for tax exemption. And while all the SUNY schools outside of New York City will be tax-free communities, private colleges can qualify. The state will determine which private colleges qualify. Personally, I hope it's Cornell University because that seems like a school that really needs the money.

Read Comments (5)

Crazy Old BastardMay 29, 2013

David my old friend, this is a great article. I truly wish you would run for
Jerry Connelly's office. With you and me down there, I would be your tax
advisor-we could wip this governement back into shape. On second thought, we
both had to much intergity and morals to ever succed in that climate. Keep up
the great reading my friend

John McGovernMay 29, 2013

You wrote:

>>That is exactly what we need, state bureaucrats determining which companies
are best suited for tax exemption.

It seems to me that all tax preferences (exemptions) are created by politicians
(or at least vetted and approved by them). So what are you suggesting? No more
specialzed deductions?

Or are you saying that someone else should determine them. And, if so, who? The
companies themselves? Federal legislators only?

Thanks.

David BrunoriMay 29, 2013

John, I believe we should end all preferences. But that will not happen. The NY
proposal grants preferences, but leaves it to the bureaucracy to determine. At
least the legislators, those purportedly responsible to the people, should
decide who gets our money and how much.

Scott in MichiganMay 30, 2013

David, what could possibly go wrong with having the bureaucracy decide who is
"worthy"? I mean there is no reason to suspect a campaign contributor would
receive special consideration. And I'm certain that traditional interest
groups like agriculture or manufacturing would be treated the same as everyone
else.

edmund dantesJun 3, 2013

To be confident that state bureaucrats will make the correct calls, we need
only send them to conferences costing hundreds of thousands of dollars, and put
them up in $1,500 per night rooms, as we do with IRS agents.

We are approaching Soviet-levels of corruption here, increasingly in broad
daylight.

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