Howard Zemsky, president and CEO of Empire State Development and...

Howard Zemsky, president and CEO of Empire State Development and commissioner of the New York State Department of Economic Development on Dec. 8, 2016. Credit: Hans Pennink

Reducing federal tax deductions for state and local taxes could “derail the economic expansion” in New York State, Gov. Andrew M. Cuomo’s economic development czar said Monday.

Empire State Development CEO Howard Zemsky, speaking at a legislative hearing in Albany, said the Republican tax plans in Congress make the state “less competitive. I think that derails the economic expansion that we’ve seen.”

Voting on the plans is expected to start this week.

Fewer deductions could reduce consumer spending because individuals will have less money in their pockets. Also, many small businesses pay federal taxes through their owners’ individual tax returns.

Zemsky also said state and local efforts to revitalize downtowns will be undermined if Republicans succeed in eliminating tax credits for historic preservation. He said the tax incentives had been used to redevelop blighted buildings into apartments, shops and business incubators.

Members of the state Assembly, from both political parties, questioned Zemsky about economic development programs aimed at helping technology businesses, including the Start-Up NY tax-free zones on college campuses. The state spent $53 million on advertising to promote the program.

Start-Up NY, which began enrolling participants in spring 2014, has been without a leader since Leslie Whatley returned to the private sector in July 2016. Zemsky said Monday he wasn’t certain a successor will be named.

Following his 90 minutes of testimony, Stony Brook University executive Ann-Marie Scheidt also answered lawmakers’ questions about Start-Up NY, which she oversees as the university’s economic development director.

Most of the program’s local participants are at Stony Brook. However, 13 out of 23 at the university had withdrawn or been removed by the state as of July, according to a Newsday analysis.

Long Island has lost 54 percent of Start-Up NY companies, the second highest loss rate in the state.

Scheidt told Buffalo area Democratic Assemb. Robin Schimminger, chairman of the Assembly’s economic development and job creation committee, that Start-Up NY’s performance has been hampered by Stony Brook’s lack of large spaces for offices and laboratories.

“We were completely unable to attract large companies or even medium-sized companies,” she said, adding that small companies by their nature may close or change their strategy.

Scheidt also said some Start-Up NY participants were too small to take advantage of the program’s primary benefits: no state and local taxes for up to 10 years and no state income taxes for new employees for as long as 10 years.

Earlier, Zemsky said the state is interested in offering tax breaks to the video gaming industry, which now employs about 4,000 people in New York City, Rochester and elsewhere across the state

“It’s a booming industry, and there are digital gaming tax credits that do exist in other states and in other countries,” he said. “I think it’s something we should look carefully at . . . It’s young people, it’s high-paying jobs.”

Projected economic impact of GOP tax changes

  • Decrease in consumer spending: Limits on deductions for state and local taxes will mean less spending money
  • Hit for small businesses: Limiting deductions also will affect small businesses whose owners pay business taxes through their personal income tax returns
  • Impact on downtown development: Ending tax credits for historic preservation will limit rehabilitation of buildings into restaurants, shops and business incubators

SOURCE: Empire State Development

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