How State of the State proposals affect business world

PHOTOGRAPHER: Peter R. Barber

Gov. Andrew Cuomo delivers his State of the State address Wednesday in Albany.

CAPITOL — New York’s economic climate and business environment were front and center Wednesday in Gov. Andrew Cuomo’s State of the State address.

Cuomo outlined an agenda that he acknowledged was ambitious. Left unstated was the cost of it all, even as he outlined obstacles, including a state deficit that could exceed $4 billion. These are, he said, challenging times.

Some highlights of his proposals that would affect the business community:

Any company doing business with the state would have to disclose its history of sexual harassment cases.
The state pension fund should invest only in companies with adequate female and minority representation in its leadership ranks.
The Legislature should require insurers to provide no-cost contraceptive coverage.
The state should extend its requirement for minority and women business participation to all state-funded projects, including by local governments, which he said have not made enough progress on this front.
The state pension fund should end all investments in fossil fuel-related businesses
The state needs to “double down” on its already nation-leading investment in infrastructure.
The state will continue middle-class income tax reductions, which are now at their lowest level in 70 years.
Modernization of airports must continue at both major downstate facilities and smaller upstate airports.
The state must expand the Excelsior Scholarship program, which can provide free state college tuition for middle-class students, to include the rich and immigrants.
The state’s municipalities must cut property taxes, which are an “economic cancer” and among the highest in the nation.

“Property taxes are now toxic to our economy and our stability,” Cuomo said.

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Other potential projects floated by Cuomo in his speech, such as a rail tunnel under the Long Island Sound and a sweeping modernization of the New York City subway system, would be very expensive, as well.

He did not say where the money would come from and acknowledged it is not readily available.

“Santa Claus did not visit the state Capitol this year,” he said. “I was watching.”

It would therefore seem likely that at least some of the costs of the proposals might be borne by businesses and/or local governments. Spending mandated by the states is a major source of expense and discontent for municipalities in New York state.

A major challenge facing the state, its government and its economy is the federal tax code, which recently was rewritten to limit the ability of taxpayers to deduct their payments for state income and local property taxes. New York is a high-tax state, and the federal tax changes are nothing short of an attack on it by Republicans trying to benefit their own states, said Cuomo, who called the situation an economic civil war.

“And make no mistake; they are aiming to hurt us,” he said.

Losing state and local deductions amounts to a 20 to 25 percent increase in the two taxes, he said, which will harm efforts to attract new residents and new businesses to New York state.

The governor drew one of his loudest and longest rounds of applause when he said the state will challenge the federal tax changes as unconstitutional.

As the state faces these challenges, Cuomo said, it can take heart in other challenges it has met and overcome, including:

The largest number of private-sector jobs ever recorded in New York state, 8.1 million.
Unemployment that has dropped from 8.3 percent to 4.7 percent.
The lowest middle-income state income tax rate in 70 years.
An $18 billion increase in spending by tourists in the wake of $200 million in I Love New York spending.

Capital Region Chamber President Mark Eagan attended the address and said he saw some disconnect between the governor’s vision and money available to make it reality.

But he said the State of the State is best viewed as just that: a vision, and more of a wish list than a concrete plan. A firmer plan will be outlined in the governor’s budget proposal, due later this month. (Even that is only a blueprint: Historically, the governor and legislative leaders privately negotiate the final spending plan.)

Nonetheless, Eagan heard things he liked in the State of the State address: Lower middle-class tax rates, increased infrastructure spending and greater use of cashless tolls.

The infrastructure spending Cuomo mentioned was mainly in other parts of the state, Eagan said, but with its old cities, the Capital Region’s infrastructure is in need of upgrades and repairs.

MIXED REACTION

Other business organizations expressed disappointment with parts of the speech, especially potential changes to wages for workers who receive tips, potential regulations on involuntary on-call scheduling for workers, and potential replacement of the state income tax with a payroll tax to sidestep the federal tax changes.

Heather C. Briccetti, president and CEO of The Business Council of New York State, said in a prepared statement:

“For the state’s business community, Gov. Cuomo’s State of the State message addressed several critical needs, including continued investment in workforce development and public infrastructure. However, the governor said too little about making the state more economically competitive, especially for upstate, where job growth continues to lag.

“We appreciate the potential impacts that federal tax reform may have on some state taxpayers and look forward to working with the governor and the Legislature on how to adjust our tax code to work better under the new federal reality. But we have major concerns with a new payroll tax, and with increasing business taxes to offset reductions in federal taxes — especially since New York’s 2014 corporate tax reform legislation, pushed by The Business Council and championed by Gov. Cuomo, has finally made our business tax climate more competitive among the states.

“We believe that the prudent path is a comprehensive response to address our budget deficit and federal tax changes. New York must examine all major categories of state spending, including the largest — Medicaid and education — and address other long-recognized cost drivers, including Scaffold Law. As the governor and the Legislature begin to tackle what will surely be a difficult budget season, we ask that they remember these simple words: ‘First, do no harm.’”

Mike Durant, state director of the National Federation of Independent Businesses, said in a prepared statement:

“As Gov. Cuomo described the financial challenges our state faces in 2018, the lack of solutions for the obstacles New York’s small businesses face is discouraging. While the governor talked about economic resurgence, small employers all across New York are faced with new labor mandates and rising costs across the board. With the current examination of predictive scheduling and the tipped wage, small business could be faced with yet more hurdles imposed by this administration.

“The significant deficit New York faces in 2018 is an opportunity for New York’s tax-and-spend culture to be reformed, not for finger-pointing at Washington, D.C. Many small businesses in New York will finally see a reduction in taxes that Albany has failed to provide them. Overhauling our tax code should include a thorough examination of our existing unsustainable spending, not imposing a potentially complicated payroll tax on employers.

“We look forward to learning specific details on these proposals in the upcoming state budget address and working with lawmakers to ensure the viability of small business in New York.”

New York Farm Bureau President David Fisher said in a prepared statement:

“Gov. Cuomo’s State of the State called for bold action to address unprecedented challenges facing this state, and that must include major obstacles facing farmers and our rural communities.

“His 2018 agenda to make New York a leader in agricultural technology and food research is a step in that direction. While food safety is of utmost importance to farmers and consumers alike, we must support efforts that give farms the tools they need to address environmental challenges, as well as meet the processing needs that consumers want. Research is a tool that is as important to farmers as the plows, harvesters and tractors they use to produce our food and fiber.

“Opening up new market opportunities also will benefit farmers, and the governor’s plan to expand on industrial hemp production and processing is appreciated. There is a demand from farmers looking to diversify their operations, and this is another way to capitalize on the effort. We are also hopeful proposed summits for forestry and logging as well as for Concord grapes will explore new ways to address the needs of those industries, and we look forward to engaging with the administration at these events on behalf of our members.”