EDITORIAL: In New York vs. Texas, it’s TKO by Texas

N.Y. gets a lesson in competition for attracting entrepreneurs

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Every successful politician understands that you never start a fight you can’t win, and it’s an adage that Gov. Andrew Cuomo of New York has taken to heart. Rick Perry, the governor of Texas, flew to New York City the other day to round up entrepreneurs to take a few of them back home to the business-friendly Lone Star State. Before he left, Mr. Perry dared Mr. Cuomo to stand up for his state’s economic policies in a one-on-one debate.

Knowing a losing fight when he sees one, Mr. Cuomo scurried off, ducking the issue. He understands that Texas is heaven for entrepreneurs, and New York is hell.

George Mason University’s Mercatus Center ranks New York the least-free state in America among its Freedom in the 50 States survey. The state ranks dead last in the center’s analysis of economic freedom, tax burden and fiscal policy, 48th in personal liberties and the imposition of irritating nanny-state laws, and 47th in regulatory burdens. Pretty miserable stuff.

Texas scores 14th overall, clobbering New York in every important category.

New York’s business taxes are high because the state has no spending discipline. The Tax Policy Center estimates the annual per-capita state spending in New York at $12,123, compared to $7,231 in Texas. Another nonprofit, the Tax Foundation, calculates that New York taxpayers work 21 more days every year than their Texas counterparts just to feed state and local government bureaucracies.

Time magazine reports that Texas added 274,700 new jobs from October 2012 to October 2013 — 12 percent of all new jobs created nationwide, while New York added just 112,700. Texans are better educated, too, by the reckoning of the U.S. News & World Report magazine’s ranking of the nation’s best high schools.

New York, however, does score higher than Texas in one miserable statistic; namely, unemployment. The Bureau of Labor Statistics measures 6.9 percent joblessness in New York, compared with 5.5 percent in Texas.

Since 2002, no state gained more new residents than Texas, which absorbed nearly 1.1 million newcomers. No state lost more people over the same period than New York, hemorrhaging a staggering 1.5 million residents, many of them trading in their one-bedroom walk-ups for a comfortable spread and a ten-gallon hat.

Mr. Cuomo understands that he has to do something. Last month, he signed a budget that slightly reduces the suffocating corporate income-tax rate and begins to phase out the corporate business-capital tax and eliminates the state income tax for manufacturers. It’s a good start.

The governor’s best-known initiative to make New York more business friendly, however, is only a smoke-and-mirrors corporate-welfare scheme. Start-Up NY, featured in television commercials starring Mr. Cuomo, aims to “revitalize” business opportunities upstate. The state and local governments will waive state and local taxes and offer handouts for hand-selected businesses that partner with a nearby college or university.

Start-Up NY eliminates taxes on favored businesses, sticking the unfavored with the bills. Therein lies the cause of New York’s uncompetitive position. Legislators in Albany are content to make tiny tax cuts and aid a few businesses at the expense of the others, without addressing the state’s fundamental problems of spending and regulating everything in sight.

Until Mr. Cuomo and his colleagues make the sweeping changes necessary to make business welcome, competing against Texas and other states offering low taxes and reasonable regulatory burdens, it won’t be a fair fight.

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