We shouldn't call them "tax breaks." It would be more accurate to call the payment reductions granted by industrial development agencies "tax hikes on everyone else."
Levies don't go down when a company convinces an IDA that it will close, move or be unable to expand if it has to pay its fair share. Every tax reduction creates a tax increase for those unable to garner their own reductions.
Taxes on Long Island and across the state are too high, so it's often impossible for county and local IDAs to achieve what should be their goal: attracting businesses that bring money to the region by selling goods and services created here. Instead, too often, we see tax breaks given to businesses that don't increase the Long Island business pie, and that may not need the breaks.
The Nassau IDA last month agreed to provide a $2-million sales tax exemption and a 20-year property tax reduction to a gym. Breaks for retail businesses are forbidden, but Nassau County IDA executive director Joseph J. Kearney said the 130,000-square-foot Life Time Fitness facility is an exception because the leasing of lockers creates a landlord-tenant relationship, and because the company claims 2,000 of the members will come to the Garden City location from outside the county, making it a tourist attraction. But experts say such startups generally just reallocate gym revenues in the area, taking customers away from facilities that are paying their full taxes.
Sunrise Volkswagen in Lynbrook got a $42,000 mortgage-recording tax reduction, a $61,250 sales-tax reduction and 12-year property tax break to modernize its showroom and buy a nearby, vacant dealership last month. Again, the Nassau IDA says it's a tourist destination because car buyers will come out from the city. But was the dealership going to move to the city to capture those customers? Unlikely.
Whether a business plan is workable is often based on bigger issues than these tax breaks. Companies threaten to leave if help doesn't come, but their appeals are often just attempts to save money. A great example is Forest Labs, a pharmaceutical company that is leaving Suffolk County and shutting facilities that employ 475 people, even though it got $7 million in tax aid from the state and the Suffolk IDA, and will likely have to repay some of that.
The IDAs pay their bills by charging fees for tax break applications. Too many denials would mean fewer applications, so IDAs have a vested interest in saying yes. Their leaders are invariably politically connected. Robert Stricoff, the Babylon Democratic Party chairman until he vacates the post Wednesday, is head of the Babylon IDA and was the choice to take over the Suffolk IDA -- until he was recently accused by Democratic leaders of taking party money. Kearney is in the inner circle of Nassau Republicans. And Lisa Cairo, one of the most successful lawyers at winning breaks from the Nassau IDA, is the daughter of Joseph Cairo, head of the Nassau Off-Track Betting Corp. and a local Republican Party leader.
Charging the same tax rate across the board would be a lot cleaner. If we want to make Long Island a fertile climate for business, we must lower taxes for everyone. These IDA breaks do the opposite.