With New Tax Breaks About To Be Announced, Advocates Highlight Need for Reforms
New York, NY— In advance of an announcement about major new corporate tax breaks from New York’s Regional Economic Development Councils, ALIGN and the Getting Our Money’s Worth coalition released a new report that examines how New York’s economic development programs perform regionally, and whether they are succeeding in creating the jobs New Yorkers need.
The report highlights spending trends and mega-projects from 7 of the 15 major subsidy programs that provide regional data, and provides a more in-depth assessment of the regional performance of Industrial Development Agencies.
The report found that spending varies dramatically by region and generally corresponds to the level of economic activity, with New York City spending the most and the Mohawk Valley and North Country regions spending the least. Industrial Development Agencies (IDAs) have increased their spending on net tax exemptions since 2009 in 7 out of 10 regions. However, overall IDA subsidy spending has remained flat due to several enormous subsidy deals in New York City winding down.
Subsidy spending is largely uncoordinated, with Regional Councils only coordinating around 6% of the $7 billion spent each year in New York on corporate tax subsidies. Big businesses take advantage of multiple, uncoordinated subsidy programs the most. For example, Target Corporation is currently receiving 14 separate subsidies across New York for their retail stores and warehouses, and this only takes into account the 7 programs with regional data. Only a tiny fraction of New York’s businesses are accessing economic development subsidies; 96% of businesses are shouldering the tax burden for the 4%.
“We need a New York that works for all of us, where big corporations are responsible for paying their fair share of taxes to support our schools, roads, public transit and the services that we all rely on,” said Tomás Garduño, Political Director of ALIGN.
Most economic development programs do not report in great enough detail to assess performance. Industrial Development Agencies (IDAs) are an exception, where an analysis of job creation performance found significant failures. The most recent IDA data shows that 33% of net spending resulted in no job promise, no job creation or a loss of jobs, meaning that if IDAs are any indication of the overall performance of New York’s economic development system, we can assume that approximately $2.3 billion is wasted each year. Overall, 72% of IDA projects lost jobs, failed to create jobs, or had no job promises. The Finger Lakes had the lowest failure rate, at 52%, while 85% of Central NY IDA projects failed.
“Too much taxpayer money is wasted on companies that fail to deliver,” said Charlene Obernauer, Executive Director of Long Island Jobs with Justice. “With high unemployment, depressed wages, and an economy struggling to recover, New Yorkers need a better return on their investment in these expensive public subsidies.”
The latest Q poll shows that New Yorkers believe that creating jobs should be Albany’s top priority in 2014, and advocates emphasized that New York’s current job creation programs are not up to the task. A recent Tax Fairness Commission report also singled out economic development tax breaks as a growing cost that is ripe for reform.
“The Western New York region is one of the biggest spenders on corporate subsidies, and we’ve seen countless abuses,” said Jennifer Diagostino, Executive Director of the Buffalo-based Coalition for Economic Justice. “Unfortunately, our region’s 78% failure rate for IDA projects is not exceptional or even the worst. These problems are systemic and must be addressed statewide.”
Legislation was recently introduced in the New York State Assembly that takes aim at subsidy spending throughout the state. Sean Ryan recently introduced the Just and Open Business Subsidies (JOBS) Act, A8203. If enacted, the JOBS Act reforms would require recipients of economic development subsidies to set clear good job and local hiring targets, transparently track subsidies and job creation on a single public website, and establish a “money back guarantee” to recapture subsidies if recipients break their promises.
ALIGN: The Alliance for a Greater New York’s mission is to create good jobs, vibrant communities and an accountable democracy for all New Yorkers. Our work unites worker, community, and other allies to build a more just and sustainable New York. ALIGN was formed in April 2011 through the merger of New York Jobs and Justice and Urban Agenda. Visit www.ALIGNny.org for more information.
The Getting Our Money’s Worth Coalition is a broad coalition of public policy experts, government watchdogs, labor unions, community and religious organizations, and concerned small business owners, workers and taxpayers. The statewide coalition is anchored by ALIGN: The Alliance for a Greater New York, the Buffalo-based Coalition for Economic Justice and Long Island Jobs with Justice.