The $10 billion rush job
A huge tax break for chip manufacturers needed far more transparency.
It seemed to come out of the blue in the last week of the legislative session: A $10 billion tax break program, moving from obscurity to approval in both chambers in a matter of days.
Did we say $10 billion? It actually may end up being double that. Who knows? Certainly not the taxpaying public that will be on the hook for this.
The Green Chips Bill creates new tax incentives for microchip manufacturers under the state’s Excelsior business tax credit program. The bill allows up to $500 million in state tax breaks annually over 20 years.
The new incentives come with some noteworthy requirements that look strong on paper at least. Projects would have to involve a capital investment over 10 years of at least $3 billion, and the chip factories, or “fabs,” would have to create at 500 net new jobs initially. The chips would have to either be made using a green, low-carbon emissions process, or be used for green products, such as electric cars.
That $10 billion could well turn into $20 billion over time when local matching incentives are figured in, warns Sen. Liz Krueger, D -Manhattan, one of the few lawmakers in either chamber to vote against the bill. She and other critics say something this costly — opponents say it is the largest industry-specific tax break program in New York’s history — should have been subject to more explanation and discussion than it was. The bill went swiftly from introduction last Tuesday to passage Thursday by the Senate and Saturday morning by the Assembly after a 20-hour marathon.
A “message of necessity” from Gov. Kathy Hochul allowed the Legislature to skip the minimum three-day “aging ” process for deliberation. And, rather ironically, this legislation was put on the Senate’s “non-controversial” bill list. Of course, that was before it had any time to become controversial.
The Hochul administration says passage was urgent in order to position New York to quickly take advantage of pending federal legislation to expand semiconductor production nationally.
We don’t disagree with the goal of attracting more good-paying high-tech jobs to New York. And beyond the local and state benefits, the global supply chain issues we’ve seen during the COVID -19 pandemic have exposed the U.S. economy’s vulnerabilities when it comes to relying so heavily on foreign production of such critical things as semiconductors.
But as New Yorkers well know, this state has a spotty record when it comes to economic development, sometimes wasting millions without getting the desired results. And while this isn’t cash the state is laying out, it’s billions that it will forego, money that taxpayers in one way or another may have to make up. A program this big should have been well scrutinized — ideally during budget talks months ago — not passed by bleary-eyed lawmakers trying to wrap up business and get out of town, or at least to bed.
The least state government can do now is something that politicians and bureaucrats are often loath to do: Take a hard look at this program going forward to see if it’s living up to all the promises, and be nimble enough to quickly shore up any loopholes that allow companies not to fully live up to their end of the deal.
And the next time the governor or legislative leaders have a big idea like this, they should let the public in on it well before the last minute.