New Jersey: Example shows the ineffectiveness of tax credits to retain businesses in the state

via NJ Spotlight | Number of the Day.

We must take the initiative not only to retain but to attract corporations to New Jersey. Our policy must be to aggressively seek potential transfers of capital to New Jersey from other states and overseas. We must be proactive. Here is why:

Once a corporation breaks the inertia and makes a decision to relocate out-of-state, the Christie administration  steps in and makes an offer, usually proportional to the number of employees that will remain in the state. Of course it is too late:  The wheels of relocation are already turning. The momentum is on the side of relocation and New Jersey’s offer has to be  disproportionally high for the for the number of jobs saved compared to what New York spends raiding our job market.

In this case below New Jersey gave a $82.5 million tax credit to save 470 jobs. New York gained 600 jobs for just $27 million.

That means New Jersey pays $175,532 for every job saved. New York will disburse  $45,000 per job gained.

“Tax credits in return for promises to keep jobs in state are always controversial, but the outcry over the relatively small $420,000 film tax credit for MTV’s reality show “Jersey Shore” helped drive Gov. Chris Christie to veto a Democratic bill extending the tax credit program. Still, New Jersey Policy Perspective, a liberal-leaning thinktank, juxtaposes the outcry over the so-called “Snooki” credit with the $82.5 million tax break recently given to London-based publishing company Pearson by the state Economic Development Authority. Pearson won the credit for moving 470 employees from Upper Saddle River to Hoboken, rather than to Manhattan.”

It goes on:

“Although the tax credits will keep those 470 workers in Hoboken, Pearson is still relocating 600 jobs from Jersey and other environs to lower Manhattan in return for additional tax credits of about $27 million from New York.”