Start-up NY: 100% Tax-Free for 10 Years?(startup-ny.com) |
Start-up NY: 100% Tax-Free for 10 Years?(startup-ny.com) |
I signed up and planning to move there IF this is not one of those 'too good to be true' deal that ends up in snow flakes.
The tax rates in BC is insane both as an employee and employer. The cost of hiring an employee because of taxation and other social welfare benefits in an attempt to become more 'Netherlandly' forces down salary for software engineers and designers. What makes it worse the scarcity of such jobs forces engineers to compete with each other on the non-paid overtime one can work to become 'invaluable'. Plenty of software sweatshops here in BC, where a nurse or a manager at mcdonalds find more stability and higher pay (when you count the unpaid overtime).
Not to mention that up to 40% of any money you make goes to federal government and the BC government still trying to pay off the loans from holding the winter olympics.
Not to mention the special taxes on rent, food, bars, everything.
If the door opens, I'm going to be the first in line to get to NY if the tax thing turns out to be true. I hear New Yorkers are mean and cold, that's totally fine with me, I'd rather have someone admit they are an asshole and not hide behind it, rather than try to deny it to keep some false image as the 'warmest part of Canada and the whole world' thing. I've been part of this hypocrisy too long.
There's a whole other state outside of NYC. In fact, many of us don't even like the city.
Western NY, where I am from, is in the Finger Lakes region. It is full of rolling hills and long lakes. There are several cities here but many, many more pastoral small towns, much like New England. The "tall" part of NYS is home to Adirondacks region which is full of east coast sized mountains and small rustic towns, plus lots of wilderness areas. Adirondack park could actually fit Glacier, Yosemite, the Great Smoky Mountains, Yellowstone and the Grand Canyon Nationals parks all inside its borders. (Although that is a bit of a misnomer--there are towns, roads, businesses and homes technically inside the park's boundaries. Some of those parks listed have nothing but parkland inside of them.)
I should say that between Buffalo, Syracuse and Rochester, I snobbishly say that I always refer to Rochester as nowhere near as boring as Syracuse or as depressing as Buffalo.
I never even went to NYC until I was 26 and by then I had been to England several times, 8 or 9 US states and 6 or 7 other major US cities.
Editorials time: I don't like NYC. Many of the people are extremely egotistical about their city, it's loud but not in a good way, crowded, dirty as hell and there are lots of shady areas. Granted it has a lot to offer but I feel the good/bad ratio is much worse than other cities. Washington DC for example is damn near as powerful and culturally rich yet isn't anywhere as bad to look at or dangerous.
Also, don't worry, plenty of people here in Rochester think Canada is pretty much Toronto and tundra, with some weird area near New England that wants to be France again. They technically know Canada goes all the way to the west coast, but but they don't really think about it.
Eliminating sales tax isn't that big a benefit either: SASS, social, or other popular startup types would not pay much of this anyway (on purchases of desks, computers, etc?).
Property tax benefits could be sizable, though many bootstrapped startups don't have this for a couple of years anyway.
Cutting franchise taxes provides a small benefit that would probably help all startups.
As others have pointed out, the non-tax costs of being in an expensive city like NYC are substantial. And don't forget, NY isn't waiving personal income taxes—so if your startup does hit a homerun, they'll take their pound of flesh on the back end.
For some startups (like the rare one with high anticipated sales tax costs), this program might be enough to tip the scales in favor of locating in NY. For most startups, however, state/local tax cuts in the first 10 years are just not that big a deal. As the saying goes: don't let the tax tail wag the dog.
Looking at the policy from a macro perspective, it looks a lot like what Swiss cantons do to negotiate tax breaks for a limited time based on anticipated future tax revenues and job creation. Also seems a lot like what Ireland has done to build up its tech sector (and been chastised for of late: see Apple, Google, etc.). So it could be produce benefits (for NY), but it would of course pull talent from other regions, thereby reducing the net benefit.
What is the Personal Income Tax exemption for employees?
Employees of businesses in START-UP NY will pay no income taxes on their wages for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 of wages for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return.
You're still on the hook for federal income tax, which is most of your income tax. (Obviously, the state can't do anything about that!)
The one advantage besides talent pool (which is a big advantage!) that both New York and San Francisco have, and that's often overlooked, is proximity to customers. If you're in a business where high touch sales are important, or where you need to be able to meet regularly with your customers, it's very difficult to do remotely.
I'm not sure if the cost-benefit really plays out in New York's favor. I often think that for what it costs to live here, it might be cheaper just to fly in twice a month from someplace else. But it's certainly an advantage I underestimated when I started out.
And I've lived here almost a year now and have never had a cockroach in my apartment, or even so much as a silverfish in the bath tub.
I'm sure you can find a really tiny non legal space in Chinatown or similar but I'm not sure I would call that a bargain.
The data proves that the kinds of companies that need a great engineering talent pool and venture capital will tend to hail just a couple of locations.
I'm not saying there aren't exceptions. There are. But in an endeavor where the failure risk is so high in the most optimal of circumstances, I wouldn't add another risk factor like location into the mix.
Just my thoughts.
Unlike NYC, in Upstate NY rent and required salaries are lower - it's a great place to start a company (though I may be a bit biased).
- In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high technology” businesses.
But this looks like a major caveat:
- Participation in START-UP NY does not necessarily require that your business be on or next to a campus, but it must be located on property affiliated with a university.
That's a very "interesting" requirement. I wonder how it will work in practice? What does it mean for a property to be "affiliated"?
Edit: here are the 3 NYC locations: http://startup-ny.com/properties/new-york-city-properties/
NYU Poly operates incubators at Jay St/MetroTech in Brooklyn and Varick St in Manhattan. Columbia has a biotech incubator (AUDOBON) in Washington Heights. Cornell has 22k ft^2 in Google's building in Chelsea. All of those sounds like they would qualify (if you could get the right people on board)
NYU-Poly has another incubator spot further up Jay St in DUMBO as well, looks like a nice space from the 15 minutes I've spent inside.
I'm a bit confused about the "need to work in a university provisioned space". Theres so many ways i'd rather interact with / collaborate with folks at universities than use their office space. Though If that meant I could have zero pay wells for papers I need to look up occasionally, that could be tempting!
-- New initiative to establish tax-free zones near and on university campuses
-- Businesses in those zones will operate 100% tax free for 10 years – no income, business, corporate, state, local, sales, property taxes nor franchise fees
-- Employees can be eligible to pay no income taxes as well
-- Business have to be either new startups OR expansion of existing businesses that will bring new jobs to New York state
-- Some industries are prohibited from participating
-- Types of companies targeted are in high-tech – generally engaged in the “design, development, and introduction of new biotech, IT, advanced materials, process engineering, electronic technology, and/or innovative manufacturing process”
The rewards go to firms most able to jump through confusing and often quite arbitrary eligibility hoops, or race to collect benefits before they are capped. (In some cases, the firms' skill in doing so is because they helped draft the program or otherwise have connections to the governing authorities.)
Jurisdictions get into bidding wars for the new/relocating firms able to qualify... but continue to subject older/less-politically-connected firms to growth-stunting tax levels. So it's creating incentives to move/restructure/game-the-rules, and an uneven playing field between sources of growth, and advantaging lawyers and policy-arbitrageurs above other more customer-focused innovators.
Just make a fair, welcoming environment for all employers, new and old, big and small, novice and expert, insider and outsider.
I would say that tax breaks are not compelling to startups since they play almost no role. But the employee income tax waiver might be significant.
You can't. The point of this program is to bring jobs to New york. You need to develop a forecast of new jobs your startup would bring to New York, which gets reported and reviewed on a regular basis. The penalties for not meeting those forecasts would be determined by your sponsoring university, which can include losing your tax free status for a year or getting kicked out of the program.
The regulations around this program aren't particularly onerous from reading the regulations document. You need to establish an understanding with a sponsoring university that your company will both benefit the community, the school's academic mission, and bring new jobs to New York. There are some reporting requirements, but that seems like a paltry ask compared to ~40-50% tax savings on profit and no income tax.
Is NY trying to race to the bottom?
HN isn't a tribune for opinions but a tribune for learning and deconstructing how the (tech) world evolves. Unfortunately on the internet, everyone thinks everyone is interested in sharing layman opinions or political POVs, but we already have Facebook for that.
We already pay high taxes and if somebody gets a tax break that means all the rest of us will pay even more.
Tax Payable on Earning 150k:
$$20,127 CAD (New York) $45,624 CAD (Vancouver, BC) 1.07 (USD/CAD)
$150K CAD ($140K USD) in NYC will result in you paying ~$58K CAD ($55K USD) in taxes between City, State and Federal.
The idea is to build more integrated links with the universities. It's intended to help drive benefits similar to the successful model used by the SUNY College of Nanoscale Science and Engineering to partner with the semiconductor industry.
Note that this is really designed to benefit NY outside of NYC.
Italy does this a lot: incentives for biotech startups founded by Sardinian women under 35, or German speaking Italians over 50 with shoe companies, or whatever other silly thing some politician decides is a good idea. It creates incentives for people who are adept at navigating the bureaucracy and finding where the government money is directed, rather than simply getting on with business.
Wow. As a former resident of NYS, this is incredible. Income tax in the state is really high and this seems like a good way to spark development.
only if you are rich enough that you don't have to pay yourself.
The rest of us have gotta pay income taxes on all the money we take out to live on until we sell out. Really, it doesn't matter if that money comes from revenue, if you are bootstrapping like I am, or from investors, if you are funded. You've gotta pay income taxes on the money you take out.
Personally? I'd rather have higher capital gains than income taxes. I've gotta pay income taxes while I'm poor; I won't have to pay capital gains until I sell the company, and at that point, hopefully, I'll be rich and have a much lower marginal value for each additional dollar.
I was recently in the situation where I had to pay a ton of capital gains tax on an acquisition, even though my company never really had a profit, and therefore paid no corporate income tax.
But I agree. Not having to pay personal income tax would be sweet. You need to go to NH or TX for that.
Incorporating in Delaware doesn't exempt you from NYC income tax if you do all your business in NYC.
Employees hired for and whose jobs are certified as net new jobs in a tax-free area will pay no state or local income taxes for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. There is an annual cap per business on the number of employees that qualify for this exemption and an annual cap statewide of 10,000 net new jobs (i.e., there will be a maximum of 10,000 tax-free jobs after year one, 20,000 tax-free jobs after year two, etc.)
Downtown is not quite New Jersey, but Midtown certainly seems to be the hotness these days.
At the same time, the older generation, such as my parents, used "New York" (or "the city") to mean approximately "Manhattan", a holdover from what the city was before the consolidation with what are now the remaining boroughs. That always seemed old-fashioned to me. I believe you can still see some old subway signs that use "New York" to mean "Manhattan". (Incidentally New York is also the name of the county that is almost but not quite coterminous with the borough of Manhattan.)
When I was growing up, the state was more or less never referred to as simply "New York" by people in the New York the city. It was "New York State", most of which was "Upstate New York" (though that couldn't refer to Long Island, and it was never quite clear where 'Upstate' began).
The reverse shibboleth quality of "New York City"/"NYC" is probably dying out, may be already dead. Nonetheless I find it annoying.
Wikipedia even notes the differentiation is important.
"The city is referred to as New York City or the City of New York to distinguish it from the State of New York, of which it is a part"
Brooklyn Bridge is basically second only to Times Square in terms of tourist nonsense. If you bike you really ought to be taking the Manhattan Bridge.