“Tax-Free NY” is now “Start-Up NY” – Still Bad Tax Policy, Still Bad Economic Development Policy

July 9, 2013. Despite the concerns raised by economists across the political spectrum, a somewhat revised version (A. 8113 and S. 5903) of Governor Cuomo’s “Tax-Free New York” proposal was introduced on June 20, 2013, passed by both houses of the Legislature on June 21, 2013, and signed into law by the Governor on June 24, 2013. The Fiscal Policy Institute’s June 11, 2013 brief on the original proposal concluded that that it was bad tax policy and bad economic development policy. Now recast at “Start-Up NY,” the plan is still inconsistent with the two long-established pillars of tax fairness—horizontal equity and vertical equity—in that it proposes to completely exempt the personal incomes of the employees of favored businesses from the Personal Income Tax for five years and then provide significant exemptions from taxation for the next five years. This “innovative” idea of exempting certain employees’ income from the Personal Income Tax also undercuts one of the main arguments for state-level business tax breaks—that the businesses receiving those tax breaks might not be paying full taxes but by those businesses locating in our state rather than somewhere else, we benefit from a broader and stronger personal income tax base. In some recognition of the shortcomings of this proposal, the revised legislation, as finally enacted, limits this exemption from Personal Income Taxation to 10,000 workers a year.

The claim that the proposal has no cost to the state is incorrect for five reasons that are spelled out in the June 11, 2013, brief. For example, by giving very favorable tax treatment to some businesses, the plan will reduce the market share of some existing businesses that do not receive this favored treatment. This, in turn, will reduce the profitability of those existing businesses and, thus, their tax liability. The favored businesses will not be paying taxes on their covered activities; and the negatively affected existing businesses will be paying less because of diminished income or closure. This will mean some combination of tax increases and service cuts for other businesses and for residents—a costly, downward spiral rather than a no-cost nirvana. The revised legislation, as finally enacted, purports to address this problem by adding “a prohibition of anti-competitive behavior” that requires program administrators to reject “any application to locate in a Tax-Free NY area … from a business that would compete with other businesses in the same community but outside the Tax-Free NY area.” This provision, as written, provides existing businesses some protection from unfair competition from new Tax-Free businesses that locate in the same community, but not from new Tax-Free businesses located elsewhere in New York State. Since retail establishments are categorically excluded from participation in the new program, it is very unlikely that a participating business’s competitors will all be located in the “same community.”

Beyond Balance: Forward-Looking Budget Priorities for New York City

July 9, 2013. All three of New York City’s citywide elected offices will have new faces in 2014. Mayor Michael Bloomberg cannot run for re-election because of the city’s term limits law, while Public Advocate Bill de Blasio and Comptroller John Liu are both running for Mayor rather than seeking re-election to their current offices. As voters consider a large field of mayoral candidates, as well as contenders for the other two citywide offices, the five borough presidencies and the 51 seats in the City Council, FPI’s Deputy Director and Chief Economist James Parrott has prepared a critical analysis of the budget challenges that loom large for the next city administration.

According to Parrott’s analysis, the city should continue the sound fiscal management practices achieved by the Bloomberg administration, but it should also elevate its critical budget choices and tradeoffs to a more prominent level. Otherwise, he warns, the pressures felt in the context of each year’s budget-balancing exercise will continue to crowd out the pursuit of longer-term priorities. The narrow focus on budget balance often has fostered an austerity mentality where gap-closing actions trump problem-solving. In emphasizing the need for a forward-looking perspective geared to meaningfully addressing city needs, Parrott calls for a multi-pronged strategy that addresses four broad areas that pose particular budget challenges for New York City: the social safety net, economic development, tax structure, and public service delivery.

The full report is available on the website of Toward a 21st Century City for All, an initiative of the Center for Urban Research at the CUNY Graduate Center. Parrott’s paper and other papers prepared for this initiative will be published as a book later this month.  A condensed version of Parrott’s ideas on the city budget and the city budget process are available as an Op Ed, “The City Budget Should Be a Force for Good,” which was recently published by The Chief-Leader.

WNYC Radio Morning Edition-Immigration Reform & Labor Standards

July 2, 2013. WNYC’s Morning Edition featured a story about immigration reform, with an emphasis on how reform by itself will not prevent workers from being paid off the books.

“My view would be that in conjunction with immigration reform you also need to have a stepping up of labor enforcement standards … to make sure people are not being paid off-the-books,” said David Kallick, a senior fellow at the Fiscal Policy Institute.

Kallick says labor departments need to audit employers regularly to ensure they’re really complying with the rules. He sees the possible passage of the immigration reform bill as a unique opportunity to renew these efforts.

“Every employer should pay for every employees work compensation and unemployment insurance,” he said. “Today … some employers are paying and others are not. So, some employers are carrying the burden for others.”

 

5 Questions for David Kallick, Immigration Expert

July 1, 2013. The Business Review interviews David Dyssegaard Kallick of FPI about the likely economic effects of immigration reform.

To me, it is obvious that reform would be good for the economy, for the same reasons that having a broken immigration system is bad for the economy. If everyone living in the U.S. had legal status it would mean more people paying taxes, more people getting services, more people paying into, and covered by, social insurance programs.

Search for a new FPI executive director

July 1, 2013. The Fiscal Policy Institute seeks an Executive Director to build on an exceptional twenty-two year record of providing high quality research, analysis, and coalition building in support of progressive fiscal and economic policies that benefit all New Yorkers.

The Executive Director, based in Albany, New York,  will be responsible for overall leadership of the organization, as well as leading, coordinating, and implementing its tax, budget and policy analysis work. The ED will oversee a staff currently consisting of 6-8 people, be a major spokesperson for the organization, lead fund development efforts, communicate with the Board of Directors, and otherwise administer the organization. The Executive Director will be accountable to the Board.

This is a full-time position. Salary and benefits will be commensurate with skills and experience.

Resumes will be accepted until the position is filled. To apply, submit a resume, policy analysis writing sample, and a cover letter specifically addressing your interest in and qualifications for this position by e-mail to resumes@fiscalpolicy.org. For more information, e-mail lavigne@fiscalpolicy.org

Read the full job description.