by Lowman S. Henry | February 19, 2019

It appears not everyone loves New York. Amazon has broken off its brief relationship with the city, long-time New Yorkers are complaining about the rising cost of getting lunch because of a minimum wage hike, and the state treasury is coming up short due to the exodus of high earners.

No, all is not well in the Democratic socialist Republic of New York.

New York’s attempt to interfere in free markets by picking winners and losers has backfired spectacularly in the case of Amazon’s now withdrawn decision to locate half of its second national headquarters in Queens.  The decision came after Left wing activists and politicians such as media darling Alexandria Ocasio-Cortez blasted the lucrative package of incentives the city and state dangled before Amazon during the site selection process.

A broken clock is right twice a day as the saying goes and it applies here.  Although for the wrong reasons, Congresswoman Ocasio-Cortez and her supporters were justified in their opposition to the Amazon deal. They decried the corporate welfare offered to lure Amazon to New York.

Amazon played cities and states across the nation against each other in a high profile sweepstakes with the prize being chosen as the site for so-called HQ2.  Offers of tax credits, tax relief, and outright grants of taxpayer money poured in as they attempted to lure the highly profitable enterprise to their venue.

This approach to “economic development” is common.  Cities and states often compete in efforts to get business to expand or locate within their boundaries.  Some components of those packages do fall within the purview of government: improvements to highway infrastructure, expanding or building water or sewage lines.  Cutting regulations and expediting permits and other approvals also are appropriate ways government can help to attract new businesses.

But, when companies – especially highly profitable ones that pay no federal taxes – are given hundreds of millions in state and local tax relief then the cost must be borne by the other businesses and individual taxpayers in a city or state.  In Pennsylvania the duplicity is extreme:  Philadelphia and Pittsburgh offered Amazon millions to come here while at the same time Governor Wolf and legislative Democrats want to tax natural gas drillers, who are already here, more simply because they are successful.

The cost of such “incentives” falls particularly hard on small businesses, almost all of which never are given any such tax breaks.  The Keystone Business Climate Survey of business owners and chief executive officers has polled this question repeatedly over the years and the people who actually own and run businesses already here say they would rather the state improve its overall tax and business climate than offer targeted incentives to favored companies.

Neither Pennsylvania nor New York has much going for them on that front.  The American Legislative Exchange Council’s newly released Rich States/Poor States report listed Pennsylvania’s tax/business climate as 38th among the states.  New York ranked dead last at 50th.

New York had the worst tax/business climate in the nation even before its increase of the minimum wage to $15.00 per hour.  In recent days price hikes have taken hold at New York City restaurants and customer complaints are on the rise.  When mandated by government to pay higher labor costs businesses have few options and raising prices is one of them.

The Lincoln Institute’s Keystone Business Climate Survey has also found that owners/CEOs will cut employee hours, eliminate jobs, or even go out of business entirely if the minimum wage is increased.  Governor Wolf, wanting to emulate the failed policies in New York is pushing for just such an increase in Penn’s Woods.  He also wants to mandate a minimum salary for teachers. Both proposals fail to take into consideration the ability of those paying the salary to cover increased labor costs.

An inevitable result of this government meddling in the marketplace is that businesses and people leave.  New York has seen a decline in state tax revenue because not only businesses, but high earners are fleeing the state to escape its high tax burden.

Pennsylvania has one advantage over New York: a state legislature that has largely kept a Democratic socialist governor from implementing disastrous economic policies.  Despite the fact these policies have already failed in our neighboring state, Tom Wolf continues to blindly walk down the same path.  It remains to be seen whether or not the legislature joins him on that journey.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is [email protected])

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