NCPA - National Center for Policy Analysis

How Stimulus Spending Ruined Buffalo

January 17, 2012

In his State of the State Address this month, New York Gov. Andrew Cuomo announced $1 billion in incentives to attract new investment to Buffalo.  Too bad Mr. Cuomo ignores the factors that help keep areas like Buffalo inhospitable to new investment -- namely steep tax rates and the high cost of government, says Steven Malanga, a senior fellow at the Manhattan Institute.

This is an old story for Buffalo.

  • Ever since the city began losing its manufacturing base in the 1950s and gradually declined into one of America's poorest cities (the poverty rate today is nearly 29 percent), the federal and state governments have poured hundreds of millions of dollars into subsidized redevelopment schemes that have yielded few tangible benefits.
  • In 2004, the Buffalo News estimated that the city had garnered more federal redevelopment aid per capita than any other city in the country, a total of more than half a billion dollars since the 1970s.
  • Yet, the paper noted, the city had virtually nothing to show for the money.

These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders.  But Buffalo also struggles because it remains among the highest-taxed localities in the country.

  • According to Cato Institute scholar Dean Stansel, a Buffalo resident pays 25 percent more in income taxes than does the average resident in America's 100 largest metro areas.
  • Buffalo's 8.75 percent sales tax, according to the Tax Foundation, is the fifth highest among the country's 120 cities with more than 200,000 residents.
  • And the property-tax burden in Buffalo and surrounding Erie County ranks in the top 10 percent nationwide.

These taxes have gone to support a spendthrift local government that nourishes itself at the expense of the private sector.  The city also struggles to cut spending because of expensive state-imposed mandates, including a union-friendly binding arbitration law that results in rich public-employee contracts, and a state law that allows unionized public workers to continue receiving the benefits of a contract even after the contract has expired.

Source: Steven Malanga, "How Stimulus Spending Ruined Buffalo," Wall Street Journal, January 14, 2012.

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