New York’s Moment to Compete: Why Staying Aligned with Federal Manufacturing Tax Policy Matters
Randy Wolken, President & CEO

New York stands at a pivotal moment.

Across the state, manufacturers are modernizing plants, investing in advanced equipment, and expanding research and development to compete in a rapidly changing global economy. Federal tax policy has recently taken the necessary steps to encourage precisely this kind of investment by allowing faster expensing of research and development (R&D) and greater incentives for building and upgrading production facilities. For New York to remain competitive, it’s critical that the state not decouple from these federal provisions.

At its core, tax policy shapes behavior. When governments reward innovation, investment follows. When they delay or dilute those rewards, investment slows or moves elsewhere. Decoupling New York’s tax code from key federal provisions would send the wrong signal at precisely the wrong time.

R&D Expensing: Fuel for Innovation and Growth

Immediate expensing of R&D is one of the most powerful tools available to support innovation. Manufacturers rely on ongoing research to improve products, develop new processes, increase efficiency, and reduce costs. Allowing companies to deduct R&D expenses in the year they are incurred enhances cash flow and lowers the risk of investing in innovation.

If New York decouples from federal R&D expensing provisions, manufacturers operating in the state will face higher state-level taxable income, even as they receive federal relief. This mismatch reduces available capital just when companies need it most—during periods of experimentation, hiring engineers, testing new materials, and scaling breakthroughs.

Globally, New York manufacturers are competing with firms in countries that aggressively subsidize innovation. Nations across Europe and Asia offer generous R&D tax credits, grants, and accelerated deductions. Decoupling would make New York an outlier, placing its manufacturers at a disadvantage not only against other U.S. states, but also against international competitors actively courting advanced manufacturing investment.

Qualified Production Property: Investing in the Future of Making Things

The ability to expense investments in qualified production property—such as clean rooms, specialized manufacturing improvements, advanced production buildouts, and other capital investments directly tied to manufacturing and production activity—supports long-term economic growth. These investments create high-quality jobs, strengthen supply chains, and anchor companies in local communities for decades.

Manufacturers don’t build facilities lightly. These decisions involve long timelines, significant capital, and careful comparisons among states. When New York decouples from federal incentives that encourage manufacturing-related capital investment and facility modernization, it effectively raises the cost of building or expanding here compared to states that remain aligned with those incentives.

The result isn’t theoretical. Projects are delayed, scaled down, or redirected. Capital that could modernize a plant in New York may instead flow to states with more predictable and supportive tax environments. Once those investments are made elsewhere, they are rarely reversed.

The Hidden Losses: More Than Just R&D and Buildings

Decoupling does more than reduce incentives for R&D and production facilities. It creates a ripple effect of additional challenges for manufacturers:

• Reduced capital investment overall, as higher near-term tax liabilities strain cash flow.
• Slower adoption of advanced technologies, including automation, digital manufacturing, and energy-efficient equipment.
• Lower workforce investment, as companies have fewer resources for training, upskilling, and apprenticeship programs.
• Increased administrative complexity, requiring companies to track separate federal and state tax treatments, disproportionately burdening small and mid-sized manufacturers.
• Weaker supply chains, as reduced investment by anchor manufacturers affects suppliers and service providers across the state.

Together, these impacts erode New York’s manufacturing ecosystem and make it harder to sustain long-term growth.

A Pro-Growth Choice for New York

Remaining aligned with federal tax provisions doesn’t mean abandoning fiscal responsibility; it means recognizing that timing matters. Allowing faster expensing improves cash flow when companies are investing, hiring, and expanding. Over time, those investments generate more economic activity, higher wages, and a broader tax base.

New York has made significant commitments to economic development, workforce training, and advanced manufacturing. Decoupling from federal incentives undermines those efforts by quietly increasing the cost of doing business in the state.

At a time when global competition is intensifying and manufacturers have more location choices than ever, New York must be clear about its priorities. Supporting R&D expensing and investment in qualified production property sends a strong message: New York values innovation, believes in its manufacturers, and intends to compete—and win—on the global stage.

Choosing not to decouple isn’t just good tax policy; it’s also good economic policy. It’s a strategic investment in New York’s economic future.