Meanwhile, Back in Albany (v19)

Nathaniel Brooks/NY Times photo

People of a certain age will remember the old saying, "if you believe that, I've got a bridge to sell you," a tip of the hat to America's Greatest Conman, George C Parker. If you don't know George, he was the guy that 'sold' the Brooklyn Bridge to newcomers to the Big Apple back in the day; he also reportedly sold Grant's Tomb.

Our con men aren't as sneaky as Parker -  they do this stuff right under our noses, by taking advantage of poorly written laws and also by taking advantage of the people we elect to the New York State legislature.

One example of this - abuses of the condominium tax break - recently re-surfaced thanks to reporting by Michelle Breidenbach. In her article for the Post-Standard and Syracuse.com, we learn of two single-family homes on the same street in one of the wealthy eastern suburbs of Syracuse. The houses were purchased for the same price, are a quarter-mile apart, and one pays almost double the property taxes of the other. The lower-taxed house is a condominium under the carefully manipulated laws of New York.

A condominium, you say? Isn't that a bunch of connected units, like an apartment building? Yes, that's what most people think a condo is. But a condo is not a condo any more - at least, not according to the law.

From Breidenbach's article:

Savvy builders across New York are taking advance of a loophole in state law that allows all kinds of homes to be called condominiums. That requires them to be assessed at a lower value than traditional single-family homes.

More than 100,000 condos in upstate New York are cashing in on the tactic. Their owners are taking an average 36% discount on their assessments, according to a Syracuse.com analysis of thousands of assessment and sales records. 

Upstate condo owners avoid at least $330 million a year in property taxes, leaving their neighbors to pick up the slack to pay for schools and local government. 

Yep - at least $330,000,000 in property taxes that are not collected, all because some lawyers and builders figured out a way to screw their neighbors - completely legally.  Again, from the article:

This strategy has spread around the state to wherever builders know the trick -- from the Buffalo suburbs to the Trump National Golf Club in Westchester County. Yes, that Trump. 

The condo break has almost no public benefit. Yet it goes mostly unnoticed by neighbors, unchallenged in Albany and ridiculed by town assessors who struggle to administer it.  

Under the law, which was created half a century ago - back in the 1960s - to protect folks who lived in NYC apartments when their buildings went condo. The law says that a condo unit - including summer homes, ski lodges, and yes, single family homes - are to be assessed based on how much owners of these 'units' can make in rental income, rather than on the value if the 'condo' was to be sold.

Clearly, the average person can see that what's happening here in the Syracuse suburbs, on Trump's golf course, and across the state is both wrong and unfair.

Meanwhile, back in Albany, no one involved in the crafting of the legislation probably ever figured that it would be so abused; they probably never thought that anyone outside NYC would have paid any attention to the law, much less used it to such in such a detrimental fashion to the rest of us.  But, that's what always happens, isn't it?

We have a long history of laws that turn into private welfare systems for the wealthy and for corporations. It's almost an expectation that this will happen whenever we come out with legislation to protect someone, or to incentivize economic development, or to enable some other lofty goal.

Remember the Empire Zone program? You know, the one that allowed companies to file paperwork to rename themselves, and take credit for 'hiring' new people and garnering them fantastic tax breaks and in some cases, tax refunds?  Or, they'd hire one employee and voila, be eligible for the special deals? There's some great (shameful?) information on how this program ran amok in this Citizens Budget Commission report.

Or how about the Tax Free NY program? That one hurts companies like the one I work for, which in one way or another has been around for some 80 years, and instead favors a different class of companies and their employees with ridiculous tax breaks?  Here's are a couple of posts I've done on this program; you can decide if you think it's fair, or if it offers any true public value.

The bottom line? Legislation created by well-meaning Democrats and Republicans we send to Albany are being abused, in many cases by donors to those same legislators. And, whether it's because their afraid of losing their campaign cash or because they're just not strong enough to walk back something that's gone awry, we're stuck with these programs.

And not only that, they continue to create new ones at every turn; a perfect case in point is the whole 'competition' for economic development dollars promoted annually by our Sonofa Gov Andrew Cuomo. We all know what happened with that program, right? Criminal convictions of key players in the program, a close compadre of the governor, and developers from Syracuse and Buffalo - so far. You can read about that gang, pre-convictions - here.

It's long past the time for putting these gimmicky programs to rest, and it's time we put fairness back into our tax programs.

Grains of Salt (v16): Cross-town Development

Grains of Salt

You all know how much I just love crazy economic development incentives.

You know, the kind that allow companies to create one or two jobs and get millions in tax breaks?

Or that encourage companies to move across town, leaving one group of taxpayers in the lurch when the business leaves, and keeping those same taxpayers plus all of the rest of them from getting tax dollars that could have been gained had the company just moved on its own and paid sales taxes and other costs associated with renovating or building their new headquarters?

Or that give tax breaks to companies they admit they don't need? Or to build apartments because there are plenty of people who want to pay to live in little boxes in the suburbs?

Yeah, politicians and the economic development folks in my neck of the woods, in Central New York,  are notorious for this type thing - most have never met a tax break they didn't like. Which is why I really shouldn't be surprised to have found this latest plan upon our return home from vacation.

BlueRock Energy Holdings, a local company started by a guy who used to work for Niagara Mohawk (now National Grid), sells energy to commercial and residential customers in New York and, in December 2014 announced they were expanding into Pennsylvania and Connecticut. They also created a second company, one that focused on "energy efficiency consulting." All good stuff, right? Local guy, home-grown company, and a growing business - expanding from 47 to 87 employees "over the next two years" they said back in 2014.

In September of this year, they announced that they had outgrown their office space in Syracuse's Franklin Square and would moving to larger space in what's now called Barclay Damon Tower (the old Marine Midland Tower on Warren and Jefferson). They're going to have around 13,800 square feet of space in their new location, compared to around 8,600 in their old space. We also learned that the company now has 67 employees and "expects to create at least 13 more jobs over the next five years."

Do the math with me. If in December 2014 they said they'd add 40 jobs in the next two years, they should be pretty darn close to 87 people by now, right? But they say now they have only 67 and don't expect to get to 80 for another five years -- which would still be seven fewer employees than they said they'd have by the end of this year. The current projections are that they're have more than 100 employees within 10 years.

What is the point of economic development funds? They should be used to help businesses expand, add jobs, improve the overall economy of the area, right? And should go to companies that really need the help, right?

Well,  maybe not.

BlueRock has applied to the Onondaga County Industrial Development Agency for an exemption from sales taxes on the $485,000 it expects to spend on furniture and fixtures and other equipment and materials for the new office (emphasis added). The sales tax exemption, if approved, would save the company $38,800 though it would have to pay the agency $5,850 in fees.

To no one's surprise, OCIDA approved the request, unanimously, this week.

So a successful business, an awarded business, a business that supports multiple professional sports teams, is moving less than a mile driving distance, and we're paying them $32,950 to do it?

Does BlueRock really need taxpayer help purchasing office furniture and fixtures?  My guess is no. Would they be stupid not to take advantage of our overly generous economic development programs? Most folks would say yes.

I would say no -- because sometimes you're the better person, the better company, if you do what you need to do using your own resources, rather than taking resources away from others.

Wondering, on Wednesday (v42)

Are you tired of year-in-review (YIR) posts and articles and emails yet, or do you still have some slim thread of tolerance for them?

I confess I haven't paid attention to half of the YIR notifications I've seen. I've been getting them for a several weeks now, it seems. I think some of them arrived shortly after the Thanksgiving tryptophan was finally out of my system.

The early arrivals leave me wondering, this Wednesday, how the authors would feel if something huge happened before the end of the year, leaving their YIR in shambles.You know, some horrible tragedy (heaven forbid) or some wonderful news like a major celebrity wedding, or the discovery of a new planet, or a famous politician's birth certificate or green card, or something like that.

Kind of like what happens when we have early voting well in advance of election day, which leaves open the possibility that a dead person could win by a landslide, or some similar bizarre occurrence. That would likely mean that a court would probably have to determine the winner. And we all know how that works out, right?

Given that my own attention span for these things is slim, I'll keep my YIR brief.

Before the end of New Year's Eve Day, I'll have had three major milestones this year:  my 25th anniversary at my day job; my wedding, and my husband's retirement.

On my 24th work anniversary, I did a post about the foolishness of the Tax-Free NY program, wondering why it was necessary for me to pay taxes as an employee of a 78 year old company, when some new kid can move in to the Empire State, hire me and I would not have to pay income taxes for ten years.  I thought it was unfair to me, and of course unfair to my company as well.

I just checked the STARTUP NY website, which is the official home of the tax free project, and realized that, for my Central New York region, the selling points for our Quality of Life include two pictures, one of fishing in the Salmon River, the other of Chittenango Falls. What's more, three other regions also feature water activities as one of their two pictures.

I'm wondering, are we trying to lure fishing-related industries here? Trying to net a big one, maybe?

The last of the three  milestones, my husband's retirement, happens officially next year, but for all practical intents and purposes, it's happening on 12/31. In the morning, we'll get ready for work and head off on the commute together, for the last time.

I'm wondering, if I'm honest, how much things will change. I've got a few more years to work, although the jury's out on exactly how many.  A lot of that depends on how much of a mess the current Congress and POTUS make of our somewhat encouraged economy, and what happens next year when the new gang is elected.  Will we be trickling down?  Will everyone be making double their current wage (if things go up in tandem with increases in the minimum wage)? Will my 401(k) keep growing, and will Social Security be gone when I get there?  So much to wonder about, with no answers anywhere in sight.

What I don't wonder about, though, is whether this is the right decision for him, and for us. After 20 years at his second career, he's done enough, and had enough, and I want him to be around when I eventually make the decision to retire. We are better when we're happy, and we're happier when we're better.

I'm sure I'll have a twinge or two of something (I'm not sure yet exactly what), come January 4th when I have to go to work and My Sweet Baboo doesn't. But then, that's something for the 2016 YIR.

A final note:  I would be remiss if I didn't talk at at least a little about this blog. Thanks to all who've hung in there with me over the past few years -- I appreciate your tolerance, your interest, and your feedback. To new readers, thanks for giving me a chance. Your feedback is also warmly welcomed.

Here are the top five posts from 2015, all of which are part of two new themes I introduced this year:

1. My Middle-Aged White Lady Perspective: Don't Apologize for the Truth
2. Wondering, on Wednesday (v30)
3. Wondering, on Wednesday (v29)
4. Wondering, on Wednesday (v28)
5. My Middle-Aged White Lady Perspective: Words Matter

I'll still be a middle-aged white lady next year, and I'm sure I'll still be wondering, when Wednesdays roll around.

Hope to see you then!

Flatter is Better

As I noted the other day, I'm a proponent of a flat tax, because it's the only sure-fire way to treat all of us equally when it comes to income taxes. I also believe that the flat tax should apply to the breathless people too -- corporations -- that are the darling of politicians across the land

Assuming we can figure out the percentage that we would need to collect from people and corporations (and there's likely an app for that), it seems there would be some obvious benefits, including:

• Increased "certainty," something we've been told countless times over the past few years we're lacking. Without it, businesses and people can't invest, can't save, and can't spend money on goods and services. Businesses can't grow. The flat tax is nothing if not certain.
• No more scrambling in the spring to see if you can get a deduction or credit. No more trying to determine if you should file singly, jointly, or some combination of that. No more marriage penalty. No more having to pay a tax service. Just a tax on the income you earn.
• If your bracket says your tax rate is 25%, but you pay 15% because of all the gimmicks, are you paying your fair share? Most companies (and people) pay a rate less than what their bracket says they should pay. If we had a legitimate flat tax rate, one that was fair across the board, we wouldn't need all this other tinkering around. And we wouldn't have it. And we'd all be paying our fair share.
• Having our money in our hands all year long gives us freedom to do what we want with it. More money for more purchasing means more goods and services to purchase, which means more jobs, which means more income, which means more taxes. Not higher taxes, but more people contributing to the tax base, because they would have jobs. In theory, that could allow the tax rate to actually go down.

Perhaps equally important, though are the other benefits we could gain by completely reforming the tax code (closing tax loopholes, eliminating the social engineering components, etc.) and implementing a flat tax

What drives our political system? Money. Where does that money come from? Lobbyists, PACs, 501(c) organizations, unions, political parties, trade associations, corporations, and even some people. Why do those organizations donate money? Because they want something - they want lower taxes, or they want special tax credits, or they want fewer regulations (many of which call for fees, which are just like taxes, or the call for changes, which cost money), or they want special treatment (which usually means they want to pay less money one way or another).

So, if you're a politician from either party and you are getting boatloads of financial help from the organizations above, or you want to get boatloads of financial help, what do you do? You work with them or on their behalf to craft regulations or legislation that work to their advantage. You dream up bills that help reduce the tax burden on businesses, by setting up tax free zones, for example, or create other 'zones' which benefit specific sets of accountants and lawyers who get their clients into the programs, often leaving other businesses (and their employees) behind. You sign tax pledges or otherwise sell your soul for the money.

The problem with all of this, which is a purposefully cynical outlook on politic, is that because of money and its influence, people who think they are paying their fair share actually end up paying more than that. Why? Because the taxes that don't get paid by the people with influence end up getting paid by everyone else.  And not only that, all of these special programs, special rules, special tax deductions and credits and gimmicks serve to create separation and division between us.

We all know someone who complains about welfare programs, lobster-buying SNAP users and all of those baby-popping-out women that are embedded in the safety net. Well, those same complaints can also be made against companies and people who benefit from the special stuff, whether it's flexible spending plans covering day care, parking and public transportation, or tax credits for charter schools or higher education, or deductions for charitable contributions, or chosen types of interest, or even deductions for additional children that people choose to have, which we find so distasteful under other circumstances.

The list could go on and on, but at the end of it, like a rainbow, there's always the promise of a pot of gold - in this case, filled with our tax dollars. Crony capitalism, special tax breaks, are just as 'bad' as any other type of handout.

And if the money was not in the picture, would the ethical landscape improve? Would it be less appetizing to a politician to consider a bribe, to do a favor, to craft and pass a bill, if they knew that there was no wiggle room in the income tax laws? I would have to think yes.

Two years ago when he was Mitt Romney's running mate, Paul Ryan repeatedly said we needed to close tax loopholes, put an end to corporate welfare, and stop treating wealthy people differently. Here's one version of that sentiment:

And what we're saying about taxes is take the tax shelters and the loopholes away from, from the well connected and the well off so we can lower tax rates for everybody.

I'm not a huge Ryan fan, but on this, he was right. Close the corporate and personal loopholes, even the ones near and dear to us; stop the social engineering; stop the cronyism; reform entitlements for the 'haves' with equal gusto as for the 'have nots' and in the process, let's get some of the money out of politics. 

Working and Paying Taxes

Today is my 24th 'work anniversary'. It was way back on March 12, 1990 that I stopped being a temporary worker at, and became a full time employee of, what eventually became upstate NY's largest regional health insurance carrier.

Over the years, I've been a claims processor, an analyst, a trainer, an analyst, a process improvement analyst, a manager, a business integration expert, a director, an analyst, a process expert, an analyst, a process manager, a requirements analyst, and a compliance program administrator.

I've been trained on lots of practical things (specifically related to our business, products, and the like) as well as how to run effective meetings, how to communicate effectively, how to lead effectively, how to use software effectively to me look smarter.

I've had Lean/Six Sigma training, and learned about the Six Thinking Hats, and Maslow's Paradigm, and where to find my cheese now that it's been moved, and how to find my strengths. I know how to lead from where I am, and how to row in the same direction as everyone else.

I'm a Change Agent. I'm a Communicator. I'm a Participant.

I'm the kind of person you might want working for you, if you were coming in with one of those new tax-free businesses where the employees don't have to pay income taxes for 10 years.

Yesterday, the Onondaga County Republicans entertained and were entertained by The Donald, His Hairness, Mr. Trump himself.  He chatted up the crowd for just over half an hour, but did not announce his intentions to run for Governor, although he did say on a radio show that he would announce by the end of the week. (We'll see whether that happens).

I'm not a fan of Trump. I think he's an obnoxious blowhard, and a master self-promoter, which in some respects makes him sort of like a politician but a little more like the Duck Dynasty Dudes.  But even Trump realizes the craziness of  the Tax-Free NY program, which makes a separate class out of those of us who work for employers like mine and folks who come in to new companies that, because of a crazy idea cooked up by our Sonofa Governor Andrew Cuomo and business lobbyists, don't have to pay income taxes.  Trump calls publicity for the program, which he says he saw running during his golf tournament, political ads that should have been paid for by the Cuomo campaign.

Even State Senator John DeFrancisco realizes that this is a bad idea, and that it's unfair competition for existing businesses.

One guy who doesn't get it is my guy, Assemblyman Bill Magnarelli, who thinks the plan is fantastic because the new businesses will not be in direct competition with existing businesses, they'll be focusing on new technology and leveraging our educational system, blah blah blah.  We get that part, Bill.

However, these new businesses will need people who have skills in some traditional areas that businesses need to focus on, like finance, and human resources, and compliance, and so on.  They'll have to come from somewhere, either with the business that moves here, or from the existing workforce, or be outsourced to some other company.  And if they come with the employer, or leave a local company to work for the new kid on the block, those people will be here, using state services, for free.

And me, with 24 years and counting at my now 78-year-old company, well, I'll be helping pay their way. Happy Anniversary to me.

Sidebar: Tax Free? Not Me

New York is notorious for coming up with economic development programs that are meant to do great things for our economy, particularly in Upstate NY.  Our politicians are nothing if not creative when it comes to this kind of program, and certainly the Tax-Free NY proposal from  Sonofa Governor Andrew Cuomo is no exception. 

As noted, the main reason I'm not a fan of TFNY is that it codifies a class system: the 'have-to' class  of New Yorkers that have to pay income tax, and the 'don't-have-to' class that, simply by the stroke of a pen, don't have to. They could be working in buildings right next door to each other, making exactly the same salary, doing exactly the same thing, living right next door to each other, going to the same churches and restaurants and grocery stores, their kids attending the same schools -- but for 10 years they are different in the eyes of the government. 

The bottom line is, this program creates not only more corporate welfare, but more personal welfare. And that's wrong.

The other reason why I'm opposed to this is that frankly Albany has a horrible track record of creating corporate welfare programs that actually benefit anyone, other than themselves. We either get promises on which businesses under-deliver (or never deliver), or we get lawyerly fun and games.

Probably the most famous of these programs was the Empire Zone debacle.  This was a lawyer's dream, a program where pretty much all you had to do was change the name of an existing company and get a fistful of tax credits as a result.  You didn't have to create a single new job; you didn't have to build a store or office building that would have put other people to work doing something productive, and where a customer could go to and spend money purchasing goods or services not previously available.

It was literally as easy as changing your shirt or underwear (more apt, I think, since for the most part it was a load of crap).  That's why, in the Tax-Free NY proposal there are supposed to be precautions so that 'shirt-changers' don't pollute the program.

For purposes of illustration, I did some really easy research and found a database of businesses, the jobs they created, and their tax credits for 2010.  Here's the intro to the data:

More than 3,000 businesses were expected to claim Empire Zone tax breaks on their 2010 taxes. The recently released information comes from records the companies filed with state economic development officials at the end of 2011. Search our database to find the companies' tax credits, investments and jobs.

Here are the Top 25 tax credit recipients for Onondaga County and the City of Syracuse.
 

Company Name  (Onondaga County)	Jobs	Tax Credit	Credit/job
Buffalo- Main Street LLC	1	$639,537	$639,537
DestiNY USA Holdings LLC	3	$440,768	$146,923
Syracuse Property Partners LLC	2	$288,335	$144,168
COR Route 5 Company LLC	4	$575,029	$143,757
Peregrine International LLC	1	$100,290	$100,290
Falso Holding Co. LLC	1	$82,362	$82,362
RLB Development LLC	9	$692,616	$76,957
BAR Advertising Co. No. 2 LP	8	$555,832	$69,479
JGB Factoring GMBH LLC	2	$131,740	$65,870
Performance Drive LLC	1	$59,565	$59,565
6580 Weighlock Drive Company LLC	1	$49,666	$49,666
Roth Global Plastics Inc.	1	$45,069	$45,069
344 South Warren Street Corporation	1	$34,586	$34,586
T-L Marketplace LLC	2	$61,699	$30,850
Basin Associates LLC	3	$67,792	$22,597
SRCTec Inc.	219	$4,808,487	$21,957
GALLAGHER ELECTRIC PARK LP	1	$19,418	$19,418
Reagan Realty LLC d/b/a MNR Consulting	3	$52,359	$17,453
The Empire Crane Company LLC	16	$264,511	$16,532
Syracuse Airport Suites LLC	14	$173,330	$12,381
East Taft Distribution LLC	1	$11,891	$11,891
Evening Star LLC	3	$30,466	$10,155
Kevidco LLC	10	$84,597	$8,460
Roth Global Plastics Inc.	2	$16,026	$8,013
Seventh Brook Properties LLC d/b/a Stickley	18	$130,879	$7,271
AVERAGE	13	$376,674	$73,808

 

Company Name (City of Syracuse)	Jobs	Tax Credit	Credit/job
CNYX Properties Inc.	1	$586,085	$586,085
One Park Place LLC	2	$656,245	$328,123
250 South Clinton LLC	3	$926,672	$308,891
XCNY Properties Inc.	2	$609,917	$304,959
Deys Plaza LLC	1	$278,763	$278,763
Carousel Center Company LP	45	$9,254,370	$205,653
Maltbie/Division LLC	1	$157,465	$157,465
300 Washington Street LLC	1	$153,272	$153,272
DestiNY USA Holdings LLC	3	$440,768	$146,923
Autocom Leasing Corp.	1	$141,347	$141,347
Pomcoplus LLC	3	$392,681	$130,894
Atrium Associates LLC	3	$311,278	$103,759
Clinton Street Soma Project LLC	1	$94,227	$94,227
Lakefront Lofts LLC	1	$92,911	$92,911
224 Harrison Associates LLC	2	$164,985	$82,493
Vinlandic LLC	1	$81,898	$81,898
Trespasz & Marquardt LLP	1	$77,483	$77,483
Sycamore Holdings LLC	1	$77,003	$77,003
Boukair Realty LLC	1	$74,110	$74,110
RHS Holdings LLC	1	$72,798	$72,798
Berkley 518 Office LLC	1	$72,768	$72,768
Sewer Sciences Inc.	7	$492,695	$70,385
Onondaga Commons LLC	1	$68,158	$68,158
One Clinton Square Associates LLC	1	$67,735	$67,735
Franklin Lofts LLC	2	$129,250	$64,625
AVERAGE	3.5	$618,995	$153,709

Seem a little suspicious, all these LLCs and LLPs and Associates and Partnerships and street addresses out there creating jobs and getting those healthy tax credits, doesn't it?

And doesn't it seem like it would be pretty easy for another bunch of LLCs and LLPs and Associates and Partnerships and street addresses to find a way to establish "a relationship to the academic mission of the university" and come up with another whole dresser drawer-full of underwear and do it all over again, doesn't it?

One more thing: a while back, David Patterson (our Accidental Governor) tried to take away ill-gotten gains (in the form of prior-year credits) from Empire Zone abusers.  The shirt-changers got mad, sued, and recently won their case against us, the real tax payers of New York.  Additional lawsuits are pending. 

Don't fall for it, again, New York.