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For Release — Thursday, July 11, 2002

WALSH: FEDERATED DEPARTMENT STORES CAN REDIRECT JOBS, INVESTMENT
TO NEW YORK—WHICH HAS ALREADY LEARNED ITS LESSON ON HIGH TAXES

ALBANY—Federated Department Stores and other businesses in New Jersey forced to retrench there by a near doubling of state corporate taxes there should consider redirecting jobs and business investments to New York - a state that has already made, and learned from, New Jersey's mistakes, the head of New York's largest broad-based business group said today.

"New Jersey may have succumbed to the illusion that higher taxes can solve budget problems. New York State did not," Walsh wrote in a letter sent today to James M. Zimmerman, chairman and CEO of Federated Department Stores, Inc.

"Faced with the same budget pressures and the same special-interest calls for higher taxes, New York stood its ground," the letter said. "Not only did New York refuse to increase taxes, this state continued with the implementation of tax cuts already on the books, including reductions in energy taxes on commercial users."

Zimmerman, in a July 9 letter to New Jersey Gov. James E. McGreevey, said that state's business-tax increase would more than double Federated's state taxes. As a result, he wrote, Federated would lay off 50 to 60 workers, slow hiring, postpone or cancel capital projects, probably close some stories, and consider out-of-state alternatives to New Jersey sites that were being considered for new stores.

"Our business climate is not perfect, but it is much improved in the last decade," Walsh said. "With an even greater presence of Federated stores in the Empire State, it can get even better - and we will be even better positioned to resist the continuing calls for a return to New York's dark tax-and-spend past."

In the early 1990s, when the nation faced a recession, New York succumbed to pressures for higher taxes. This made its recession much longer and harsher than the nation's, and the state continued to lose jobs for two years after the nation recovered.

As hundreds of thousands of jobs fled the state, New York recognized and reversed its policy misstep. Beginning in the mid 1990s, New York began cutting taxes. Its business climate improved, it regained all the jobs it lost and more, and, by the end of the decade, it achieved a job-growth rate that surpassed the nation's.

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