by Jon Whiten
As New Jersey Policy Perspective documented in our most recent report on New Jersey’s business tax subsidy surge, the state’s use of tax breaks to “create jobs” has increasingly focused on both shifting existing jobs around different areas of New Jersey and poaching jobs from neighboring states.
The share of subsidies tied to existing jobs has almost doubled this decade, to 43 percent from 25 percent in the 2000s and zero percent in the 1990s.
In other words, nearly half of the jobs taxpayers have been asked to subsidize since 2010 are already here in New Jersey.
The advocates of subsidy programs respond to these observations by citing the fierce regional competition for jobs, and, in the end, throw up their hands and say that since “everybody’s” participating in this race to the bottom, there is no choice for New Jersey. It’s either play the game or lose.
But there is another path, one built on cooperation and regional growth. It has been successfully taken in several metropolitan areas and is being championed by business leaders in the Midwest, as Good Jobs First documents in a newly released report. And it’s a path that we recommend New Jersey take as well if it wants to truly focus on long-term economic development rather than the short-term “wins” associated with job poaching.
The practice of job poaching, or “local job piracy,” as Good Jobs First calls it, is defined as using subsidies to attract businesses from nearby communities in the same metro area.
The practice “generates heavy costs for regions in terms of both lost tax revenues and externalities associated with sprawl while failing to create new jobs,” the report notes.
However, local governments have worked together in the Denver and Dayton regions to create successful agreements that have led to “an economic development ethos that is focused on shared regional prosperity.”
Good Jobs First suggests that cooperative processes should be emphasized and formalized for successful regional economic development. In other words, leaders from neighboring states should pledge to work together to stop counterproductive job piracy, but legislators must also back those pledges up with smart policies that reform state economic development programs to limit job poaching.
One change in particular would build on the recent Economic Opportunity Act, which finally acknowledges that “retained” jobs aren’t worth as much as new jobs: Don’t allow companies to receive state subsidies for relocating within a metro region if that relocation lacks the blessing of the community the company is leaving.
Jon Whiten is New Jersey Policy Perspective’s deputy director.
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