Governor Paterson has proposed scrapping Empire Zones, the state’s $600 million-a-year business subsidy program, and replacing it with an entirely new structure of incentives. Included: A new initiative that would compete with New Jersey’s subsidy programs, which are often credited with luring financial and other companies across the Hudson.
The governor’s plan, put together by Empire State Development Corporation chairman Dennis Mullen, was announced in the state of the state address Wednesday and was dubbed “Excelsior Jobs.”
The plan, which would require approval of the Legislature, calls for a program to give tax credits to companies throughout the state that create jobs lasting more than five years. The credits would be based on income, not simply the number of jobs, meaning finance firms, for example, would get more incentive-per-job than typical manufacturing jobs; they would not be limited to individual geographic zones, and rather would be available statewide. There would also be an expanded research and development tax credit and a capital investment tax credit, all statewide, though the exact amount of resources going to these programs is yet to be enumerated.
“Our expectation is that we will have a return on that investment,” Mr. Mullen said. “It is not trick or treat.”
The job creation credits seem like they will rival New Jersey’s incentive programs that offer tax credits of up to 80 percent of the income taxes generated for firms that relocate there and create jobs in the state. New Jersey often cites this program as a reason that it is able to poach Manhattan-based firms, like, most recently, the Depository Trust & Clearing Corporation. Still, competition on this front is often viewed as a race to the bottom, as neighboring states simply engage in an arms race by piling on more incentives. Then again, so long as they’re still receiving some sort of return on the investment, states are often left with little other choice than to compete with their neighbors, lest they be repeatedly bested.
With the Excelsior program, the devil will be in the details, and, for now, there are few. Still, state business groups have generally welcomed the news.
“I’m very enthusiastic about what’s going on with state economic development,” said Kathryn Wylde, president of the Partnership for New York City, which has been urging a job creation tax credit similar to what was proposed.
A change from the status quo is essential, she said.
“When a business is looking for a location decision, and they scope out what are the advantages and benefits available in various states, New York doesn’t even make the list because you had to negotiate for two years just to figure out what you could qualify for.”
Mr. Mullen said more details would be made clear in the budget, which is to be released later this month.
Politically, it’s unclear how well Albany will receive the overhaul. Empire Zones could be popular in individual members’ districts, though the plan calls for all the companies currently receiving benefits to continue to receive them.