The Power of Zero

Local manufacturers got a pleasant surprise Tuesday when the state budget cut their income taxes from 5.9 percent to zero percent.

The budget also provides a 20 percent property tax credit for manufacturers that own or lease property in the state.

Sarah Eckler, the vice president for sales and marketing at Townsend Leather in Johnstown, said her company is pleased by the state tax cut.

“As far as Townsend Leather is concerned, any tax cuts for manufacturers is good news. With ever escalating costs, we can use all the help we can get to stay a viable business,” Eckler said.

Townsend Leather’s core business is making upholstery hides for seating in the private and corporate aviation market. The company also makes leather upholstery for interior designers as well as the residential market, hotels and casinos and cruise lines. Before the recession hit in 2008, the company employed 220 people, but since then they’ve dropped to 145 people after a major contraction in the smaller private plane market.

Eckler said the tax relief from the state is coming at a time when Townsend Leather faces many challenges.

“The cost of our raw material has increased well over 30 percent in last couple of years. Healthcare increases significantly year-to-year and all utilities and other operating costs do as well. And our customers are not wanting to see a price increase – they are asking us to hold pricing or even decrease it,” she said. “So, tax cuts for manufacturers are very welcome and needed in New York State so small businesses like ours can survive the short and long term while continuing to provide our valuable employees living wages and benefits competitive with other larger corporations or employment opportunities.”

Ken Bach, the owner and president of Johnstown-based antenna manufacturer Electro-Metrics Corp., said the tax cut should help his company, but not a lot.

“I have not had time to thoroughly analyze the overall impact of the tax revisions that will come into effect for 2014. However, with a quick look using figures from our company’s 2013 performance, I estimate that the impact would have been about 0.7 percent of sales, plus whatever contribution would come from the utility surcharge phase out, I believe the total would be approximately one percent of sales,” Bach stated in an email to the Leader-Herald. “This would not be a huge impact on our company’s performance, but the cumulative impact on all upstate manufacturers will be truly significant!”

Fulton County Planning Director James Mraz said few manufacturers have probably figured out the complete ramifications of the tax cut yet.

“Unfortunately, that’s the nature of the budget process in New York state, you find out about things at the end, you’re given 48 hours and then they vote on it,” Mraz said.

Mraz said the manufacturers income tax cut, as well as the property tax credit, should help the local area and New York state attract more businesses by helping to improving the state’s image as having the worst business climate of any state.

“This by itself will not jump us from the bottom of the pile to the top, but it’s certainly a positive step,” Mraz said. “It’s just one step at trying to [redeem] New York state’s image as being a highly taxed state and one that’s difficult to do business in.”

The budget also includes an accelerated phase-out of the 18-a utility surcharge, which has been a thorn in the side of many businesses and pro-business groups. The assessment will be phased out over the next three years. As the 18-a is being phased out, business and home ratepayers will save $600 million.

Fulton and Montgomery Regional Chamber of Commerce President Mark Kilmer said the chamber has lobbied for reform of the 18-a surcharge and he’s glad it’s being eliminated.

“The 18-a surcharge wasn’t referred to as a tax, but it is still a tax because it’s an assessment on the bills of everyone, including the major manufacturers. In research we’ve done with some of our members we’ve seen that some were paying as much as a $250,000 a year just from that assessment,” Kilmer said. “It’s certainly going to have a major impact on our larger companies.”