Press Release: Obscure Tax Break for Wealthy Firms in Times Square Removed from State Budget after Good Jobs New York Reveals Unpublicized Provision in Empire Zones Reform Legislation

Action Saves Millions of State Tax Dollars

New York, NY April, 20, 2005 - Budget amendments approved by the State Legislature last week removed a provision that would have given wealthy corporations in midtown Manhattan up to five additional years of benefits under a wayward tax break known as the Zone Equivalent Area (ZEA) program. The change followed the April 1, 2005 release of a report by the watchdog group Good Jobs New York that called attention to the provision, which was buried in one of the budget bills passed by the Legislature on March 31^st. It would have made the additional benefits available to wealthy firms - including Giuliani Partners and Ernst & Young - that registered for ZEA benefits prior to the program's sunset in June 2004. An updated version of the briefing paper and a complete list of ZEA recipients in Manhattan below 59^thStreet are available at www.goodjobsny.org.

Timely action, especially by Assembly Speaker Sheldon Silver and Assemblymembers Richard Brodsky and Thomas Di Napoli, ensured that the budget amendment bill passed on April 12^th removed the ZEA rider.  The program's demise was greeted with satisfaction by Good Jobs New York.

"The ZEA program was a perversion of economic development spending. It took tax credits meant to help poor people get jobs and used them to enrich already wealthy companies," said Stephanie Greenwood, Good Jobs New York's Research Analyst. "We applaud the state legislators for acting quickly and responsibly to remove this wasteful, retroactive extension of benefits."

Originally conceived as an anti-poverty program, ZEA offered companies wage tax credits for hiring new employees in areas that had high poverty and unemployment levels in 1990. The problem was, as GJNY showed in its briefing paper, many firms received ZEA credits for highly paid financial-sector employees. Higher levels of benefits were available if companies hired low-income residents. However, the program failed to include local hiring requirements, nor did it account for changing conditions such as Times Square's transformation to a business and tourism center. Firms in New York City's wealthiest business districts were able to take advantage of tax credits, with no guaranteed benefit to working New Yorkers.

The exact dollar savings to the State budget from the Legislature's recent action is not known. Poor reporting requirements make it impossible to know how much the program has cost taxpayers over the course of its ten year existence. The New York State Department of Taxation and Finance publishes a partial report that covers only regular business corporations and excluding the many recipients that are banks, insurance companies, or unincorporated businesses. This report appears on a four-year time delay.

The most recent, published in March 2005, covers regular business corporations that used the program in 2001. During this year, businesses took advantage of $10 million worth of the credits. This represents a large jump from the previous year, where only about $1.3 million was used. (The updated briefing paper available on GJNY’s website contains additional information about the estimated cost of the program.) Use of the program increased so dramatically because effective with the 2001 tax year, the guidelines for the program were loosened resulting in a substantial increase in the number of applications for ZEA benefits - many from successful business districts like Times Square. Data for years after 2001 have not yet been published by the Department of Taxation and Finance.

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