This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

US States in Tax Contest to Attract Jobs


By the Financial Times (Financial Times) -- As U.S. states jockey to attract jobs to push down high unemployment rates, companies are benefiting from a host of tax breaks and other government-funded incentives.

But the race to offer sweeteners to corporations is raising questions about whether they are worth the cost.

South Carolina, where the unemployment rate rose to 11.1% in August, announced last week that tire maker Bridgestone would be eligible for several million dollars in tax credits if it fulfills plans to create 850 jobs at a new plant.

Maryland is looking at expanding benefits for biotechnology and research and development groups, while Missouri's legislature is considering a $6 million program to keep jobs from decamping to neighboring Kansas.

In the New York metropolitan area, competition between New York and New Jersey has generated millions of dollars in subsidies to businesses.

Critics, however, question how much cities and states benefit from what they say is mainly a reshuffling of the existing workforce rather than net job creation in the region.

"Generally such moves involve just moving jobs around," said James Parrott, chief economist of the Fiscal Policy Institute. "Companies play one [state] off the other." He argued that for most businesses, "location is so important that no matter what the subsidy is, it can't be the decisive factor in where they're going to locate".

Both New York and New Jersey are battling high unemployment. New York's unemployment rate is hovering around 8%, while New Jersey's rate was 9.4% in August, up from 9.1% at the start of the year.

New Jersey's Economic Development Authority this year awarded Panasonic $102.4 million in tax credits to relocate its headquarters from Secaucus to Newark in an effort to keep the electronics maker in the state.

Citigroup received a $12.3 million package tied to moving as many as 400 jobs from New York to Jersey City.

And Pearson, owner of the Financial Times, could net as much as $130 million in incentives from both states as it prepares to move about 1,200 employees to downtown Manhattan and to Hoboken in New Jersey.

Michael Bloomberg, New York mayor, said at a press conference announcing Pearson's decision to open a new office in New York: "We shouldn't focus on where the jobs are coming from, we should focus on the fact that they're moving here." But his official press release listed a host of sweeteners offered by the city and state "in order to counter efforts by the state of New Jersey".

Among the incentives were $9 million in state tax credits and another potential $38 million from New York City.

New Jersey officials voted this month to give Pearson up to $82.5 million in credits to keep about 650 jobs in the state.

"Both the states of New Jersey and New York were made aware that we were considering our options," said Wendy Spiegel, a Pearson spokeswoman. "The city of Hoboken and the city of New York were very interested in this very desirable group of employees as well as the opportunity to bring future jobs."

Randy Coburn of New York's Empire State Development says there is "a lot of direct competition" between states, adding: "Sometimes we're in a strong competitive position [to attract business] and the economic development incentives may be less important but sometimes all other things are equal and then the credits play a larger role."

Still, New York City has boosted the tax breaks and exemptions it offers to companies over the past decade to an estimated $3 billion a year -- a faster rate than the city's tax base has expanded, Parrott said. That figure includes more general incentives as well as credits tied to relocating, retaining or adding jobs.

"That's $3 billion in tax revenues that's not coming in," he said. "Given the budget pressures that the city has, it's far past the time that the city should scrutinise its total business tax expenditures."

While New York is an expensive place for businesses to operate, the city's Economic Development Corporation says that economic incentives are not its primary tool for attracting jobs. The non-profit group charged with promoting growth says that New York offers other benefits to companies, including proximity to clients and quality of life.

"We are committed to making investments that yield the most benefits to the city for the lowest commitment of city resources," said EDC officials.

Pearson's move to lower Manhattan includes $4.5m in discounted energy for the building and two other properties in the neighborhood. The credit comes from an allocation the city receives from Con Edison, the energy company.

"We're giving away Con Ed's money," Bloomberg said. "We're not doing anything with city money."

Doug Muzzio, a public affairs professor at Baruch College, said that for city leaders the appeal of such incentives goes beyond potential economic benefits.

"The political argument is, hey, I'm creating jobs. It's psychological, a boost for the city that we've won, that we've beat those guys in New Jersey.

"But what you see depends on where you're standing."

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs