Philadelphia skyline

Tax-free zones appear to be gaining momentum in major cities in America with top politicians in both parties championing the idea as the surest way for cities to revitalize their downtrodden areas.

Yet, as other cities run with the idea, a majority of Philadelphia’s own low-tax zones are set to expire.

In New York, Democrat Gov. Andrew Cuomo launched START-UP NY, a program designed to give businesses tax-free status for 10 years. The program is the boldest of its kind — with no state income tax, no sales tax, no corporate tax or property tax if businesses relocate or start up in specified areas around college campuses in the state.

 

“Hundreds of business leaders and CEOs from around the globe have come together for the official launch of START-UP NY to take advantage of the most ambitious economic development program in New York State’s recent history,” Cuomo said at the press conference. “In a tax-free environment, no one can match what New York has to offer.”

It was a smart move by Cuomo. It’s my guess that he made a New Year's resolution to create economic growth in his state. With his plan, it is clear he is focusing on the big picture of long-term growth.

A similar idea is buzzing around the bankrupt city of Detroit. Sen. Rand Paul, a Republican from Kentucky, unveiled his bill for “economic freedom zones” across America at the Detroit Economic Club.

“This bill will lower personal and corporate taxes in Detroit to 5 percent. My bill will also lower the payroll tax,” Paul said during his speech that aired on C-SPAN. “Economic freedom zones will cut out the red tape that keeps new businesses from starting and older businesses from thriving.” Paul, a presidential hopefully, pitched the plan as a nationwide alternative to the unpopular bailouts.

“How will this differ from a traditional government stimulus? First, these zones don’t ask Houston or don’t ask Atlanta to bail out Detroit. These zones allow Detroit to bail themselves out,” Paul said.

Paul’s plan would not be a magic bullet that saves Detroit from years of bad policy that led to their bankruptcy, but it would be a good start that reinvigorates business into the city.

How does Philadelphia measure up in comparison?

A majority of Pennsylvania’s own low-tax zones, called Keystone Opportunity Zones, are located in Philadelphia and are expiring at the end of 2013. The program is more complex and less attractive than the newly created New York version.

It was founded in 1999 with a similar mission as the others — spurring economic growth in areas that needed it most. And it appears to have done just that.

The Harrah’s casino in Chester was built in a Keystone Opportunity Zone. The casino has a value of $218 million and employs 1,672 people, according to The Philadelphia Inquirer.

A 2010 overview of the program by the state of Pennsylvania claims that it has created around 8,000 full-time jobs in Philadelphia. It’s clear that the Keystone Opportunity Zones work, but the program needs to be updated. It needs more teeth and a leader willing to expand it in Philadelphia if the area will continue to compete with New York.

Matthew M. Turner is a columnist for Metro Philadelphia. His opinions are his own. You can reach him atmatthewmturner@hotmail.com.

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