Pat Garafalo at The Nation writes—New Jersey Exposed One of Corporate America’s Favorite Schemes. A state investigation revealed how companies use empty threats to pry money from local governments:
When the tax-preparation firm Jackson Hewittwanted a round of tax breaks from New Jersey, its executives knew exactly how to get them: by threatening to move jobs to another state. It apparently didn’t matter to them that the threat was entirely hollow.
Testifying last month before a task force examining New Jersey’s corporate-tax-break programs, former Jackson Hewitt executive Gulsen Kama said that even though the company’s decision to stay in New Jersey was a “done deal,” it nevertheless invented a potential move to Florida or New York, which won it nearly $3 million in “inducements” to remain in the Garden State. Kama also alleged that the company didn’t keep the promises it made in order to qualify for its tax breaks, and then fired her when she pointed out the violations.
All in all, Kama presented a portrait of corporate greed run amok. But that we’re hearing about this sordid episode at all is actually a testament to the state’s officials. New Jersey is doing the nation a favor by pulling back the curtain on a problem with which nearly every city and state in America deals: being blackmailed by corporations into coughing up public money.
Democratic Governor Phil Murphy initiated an audit of his state’s corporate-tax-break programs shortly after he came into office, and the effort has shown how taxpayers consistently lose these corporate-state arrangements. In theory, programs like New Jersey’s Grow New Jersey Assistance Program and the Economic Redevelopment and Growth Grant Program give companies a break on their taxes or some sort of lump payment that encourages job creation and growth, thereby garnering the city more revenue and economic development in the long run. States and cities spend tens of billions of dollars annually on these sorts of tax breaks and giveaways: Estimates range from $45 billion to nearly $100 billion.
On every measure that should matter, though—jobs, incomes, economic growth—studies reveal that corporate-tax incentives do little to nothing. Instead, corporations simply receive windfalls to do what they would have done anyway, or turn around and break their promises regarding job creation, while keeping the money they received. [...]
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