Dan Gundersen, Upstate chairman of the Empire State Development Corporation, came to the Buffalo Niagara Partnership today to discuss state incentives to businesses, and how we compete for that business with other states.
In a nutshell:
- Business incentives have become an entitlement, not an incentive. Businesses not given an incentive package to come to New York (or any other state, for that matter) will generally choose to go to some region offering an incentive package.
- Because New York has real estate taxes 50% higher than the national average it must offer incentives to lure businesses to the state. The problem is that incentives are being offered by every state, regardless of where they rank tax-wise. The conclusion: Offering incentives rarely provides New York an edge over other states.
This is the classic race to the bottom. As each state tries to outdo every other state the logical conclusion is that businesses will eventually be incentivized (read: entitled) to locate to the region that offers shovel-ready or spec-built real-estate essentially for free – no taxes, ever. People who are lured to that region for the jobs it produces may be burdened with taxes, but not the businesses providing those jobs.
Given that our current system of taxation is plainly not working well, New York State might be wise to grab the lead on this and offer a free ride to any company willing to relocate to the state – especially to the upstate area.