Tax-Free Zones in New York Inspire Spin-Offs in Ohio, Rhode Island
- Oct 26, 2014 | Gail Cole
In January 2014, New York State created tax-free zones in and around certain college campuses in order to “attract and grow new businesses across the state.” By some accounts, START-UP NY is doing just that. Twenty-five companies promising close to 750 new jobs were accepted into the program as of late September. Last week, six more businesses were accepted into the tax free zone at Stony Brook University, in Stony Brook; they promise to create 90 jobs and invest more than $3 million in the area. And five companies (with 123 jobs and an investment of $3.17 million) are planning to relocate, expand or start-up near the University at Buffalo.
In exchange for the jobs and the economic stimulation, START-UP NY businesses pay no state corporate, income and sales taxes for ten years. Employees of participating companies pay no income taxes for the first five years, and reduced income taxes for the next five years. No more than 10,000 net new jobs eligible for the personal income tax benefits will be created each year.
START-UP NY replaces the Empire Zone program, which allowed existing New York businesses to use loopholes to “secure tax breaks worth millions of dollars a year for more than a decade without creating new jobs.” It has garnered a lot of positive press. Yet the program does have detractors; some business leaders point out that “the program doesn’t address the problem of too high taxes for existing companies,” and that the Syracuse area, which has six tax-free zones, has drawn no new businesses. And some worry that businesses will not create the “influx of jobs” START-UP NY says they will.
On the other hand, Ohio Representative Michael Stinziano is so impressed with the program that he would like to establish a similar program in Ohio. The Democrat is planning to introduce legislation that would exempt “new companies and their employees from paying state taxes for 1o years if the company is located in a university community and creates new jobs.” He shares the enthusiasm of Governor Cuomo’s, who expects START-UP NY businesses “To bring in $50 million and as many as 400 new jobs….” Rep. Stinziano thinks Ohio is “the ideal environment” to foster the same type of success.
Rhode Island lawmakers are also considering a similar program.
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