You are probably familiar with the concept of "Race to the Bottom", the idea that competition between governments for job creating investment capital leads them to a cycle where they lower regulatory, labor, environmental and other standards in an effort to appear more attractive to potential suitors. While the bulk of what I have read about the process deals with issues of globalization and the offshoring of jobs, a similar dynamic can come into play domestically when states and municipalities compete for investment capital. Thanks to the work of a couple of upstate New York papers, we now know that this state has definitely reached the bottom and in some cases is pretty much giving away tax incentives to corporations for little if any job creation.
One of the major economic development programs in the state of New York is the Empire Zone program. The goal of the program, their website tells us is
to stimulate economic growth through a variety of State tax incentives designed to attract new businesses to New York State and to enable existing businesses to expand and create more jobs.
This is done by awarding qualified busineses a variety of tax breaks inlcuding sales tax exemptions, property tax refunds and other benefits. In order to qualify a business
must be able to demonstrate that it will create new jobs and/or make investments in the empire zone and be consistent with the local zone’s development plan, including a cost-benefit analysis.
The exact details of the benefits had been kept secret, but in February a judge granted a Freedom of Information Act request by the Syracuse Post-Standard and since then the papers have been examining the costs and benefits of the program.
I'm not an economist and can't speak to the total merits of the program, but you don't have to be in order to be upset by the instances where the state is giving away money for nothing in return. Here are just a couple of examples.
In Albany county
Brookfield Power, a Canadian company that owns the School Street hydroelectric power station on the Mohawk River in Cohoes, receives about $1.3 million in tax breaks each year from the Albany County Empire Zone.
State records show that less than one full-time job was created at the site between 2003 and 2005
In Broome county,
Huron Real Estate Associates in Endicott received $20.2 million in Empire Zone tax breaks from 2003 to 2005. Yet the company created 17 jobs during the period, equating to about $1.2 million for each new hire.
and in Syracuse,
_An Illinois real estate group expected $1.3 million a year in zone tax breaks for five Syracuse office buildings. It had 3.75 employees there, records show.
_The owner of AXA Towers (formerly MONY Towers) in Syracuse, another out-of-state landlord, expects more than $1 million per year in zone tax breaks. Employees: two $10-an-hour maintenance workers.
After crunching the numbers, the Syracuse Post-Standard (who originally filed the FOIA request) concludedsmall companies (less than three employees) received $102 million in tax breaks a year. The payoff from these tax breaks,
On average, those employers receive more than $47,000 a year in tax breaks for each employee while paying many of those employees less than half that amount, according to the Syracuse Post-Standard.
Pretty nice gig if you can get it.