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For Release — Tuesday, February 10, 2004

COUNCIL'S TESTIMONY URGES LEGISLATURE TO REJECT NOSTRUMS
THAT SAY HIGHER BUSINESS COSTS ARE GOOD FOR NEW YORKERS


ALBANY— Lawmakers formulating a state budget for 2004-05 must "reject the idea that increasing the cost of doing business is good for working New Yorkers," The Business Council told the state Legislature today.

"We ask you to return to the vision that prevailed in Albany for eight years in a row—the understanding that cutting taxes and making our business climate competitive will give more New Yorkers the jobs they need," Ed Reinfurt, vice president of The Business Council, said in testimony on the 2004-05 state budget. The Council's testimony was submitted Feb. 10 at a joint hearing of the Senate Finance Committee and the Assembly Ways and Means Committee. The testimony is at www.bcnys.org/whatsnew/2004/0210testimony.htm.

New York has faltered badly in two key sectors, manufacturing and the securities industry, Reinfurt said. An improving national economy may spur job growth, but New York is unlikely to share fully in these gains, he added.

"The cost of doing business in New York remains too high," he said. "We have the heaviest tax burden in the nation. Health-care costs in New York are high. So are the costs of energy, workers' compensation, and regulation." In fact, many business owners fear that Albany has lost interest in these concerns because it dramatically increased spending and taxes last year, and because state actions still inflate health-care costs, energy costs, and others, he added.

The Council's testimony outlined a number of specific policy recommendations:

Reject new tax-increase proposals: Projections about budget gaps in 2005 and 2006 have raised the specter of new tax increases in those years, and spending interests are already mounting pressure for new tax hikes this year, Reinfurt noted.

"We expect that the temporary tax increases you enacted last year are just that—temporary," Reinfurt's testimony said. "The pledge from Senator Bruno and Speaker Silver of no new taxes, which we applaud heartily, must be more than a one-year pledge."

He urged lawmakers to reject pressure to collect a stock transfer tax, noting that it would likely hurt New York's ability to compete for securities-industry activity. He noted that the New York City Independent Budget Office has estimated that a city stock transfer tax would drive away 60,000 jobs, nullifying much or all of the net revenue expectations.

He also urged lawmakers to reject a punitive health-care tax proposal being advanced by hospital interests and a health-care workers' union, noting that New York's Main Street business community overwhelmingly opposes it. Instead, he said, New York should consider a proposal to create a tax credit for business health insurance. This proposal is being advanced by state Sen. James Seward (R-Otsego County) and Assemblyman Joseph Morelle (D-Rochester).

Medicaid reform: New York's long-term fiscal health will require restraining Medicaid spending, Reinfurt said. The Council supports relieving counties of their burden-if that comes with "an ironclad requirement" that counties return savings to taxpayers. The state can also cut Medicaid costs by making its benefits comparable to those that most taxpayers buy for themselves through their jobs, by using technology to improve the efficiency and quality of care, and by disseminating data on state health-care performance to help different regions learn from other regions' successes and failures in containing Medicaid costs.

Single-sales factor taxation: The Council supports this reform, which would base New York's corporate taxes just on in-state sales. Research shows that the reform could add 133,000 jobs and increase state revenues. The Governor's proposed five-year phase in should be accelerated by three years or more, and the definition of manufacturing should include software developers, publishers, and nanotechnology businesses. The Council also believes a hold-harmless provision should be enacted to ensure that no manufacturer sees its tax liability increase as a result of this reform.

Empire Zone reform: The Council supports the Governor's proposal for different zones to address different priorities: support for distressed areas, help for county-level development priorities, and statewide benefits to help attract major new investments. The Council also believes zone eligibility criteria should be refined so benefits can go to manufacturers anywhere in the state that make major capital investments to create or retain jobs.

"To become more productive, manufacturers must continuously invest in modern machinery and control equipment to maintain a competitive edge in an increasingly cost-competitive world," Reinfurt said. "We cannot continue to measure manufacturers' commitment to New York, and award them incentives, based on employment count alone." He noted that New York has been losing an average of 100 manufacturing jobs every day for five years - jobs that, in upstate counties, pay more than $11,407 a year more than the average non-manufacturing private-sector job, he said. Using zone benefits to encourage capital investment would help spur the investments manufacturers need more than ever to compete.

Power for Jobs: The state should extend Power for Jobs contracts for businesses whose allocations will expire in 2004. Power for Jobs offers reduced-rate power to employers that pledge to use it to create or retain jobs. The concerns that prompted creation of this program—high costs and inadequate supply of electricity—remain paramount, Reinfurt said. What's more, recent regulatory initiatives in New York - new acid rain regulation, the state's $150 million annual system benefit charge added to electricity bills, and ongoing efforts to require customers to buy some of their power from costly renewable sources - are further increasing electricity costs in New York.

"Cleanup tax" repeal: Legislators should repeal the onerous "cleanup tax" imposed as part of the 2003 brownfield redevelopment law, Reinfurt said. This new tax imposed $20 million in new costs on the state's manufacturing sector. The new surcharge could cost as $400 per ton, which in many cases exceeds the costs of treatment and disposal. The Governor's last two budget proposals have included an explicit surcharge exemption for cleanup wastes. The new law should be amended to include this exemption.

Higher education capital grants: The Council supports the Governor's proposal to create a new higher education capital investment matching grants program open to all colleges and universities, public and private. The program's proposed matching requirement would add accountability and leverage to efforts taking place at campuses throughout the state to upgrade institutions' key facilities and programs, Reinfurt said.

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