"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Saturday, July 30, 2005

Trenton Democrats Back Corporate Welfare

The Trenton Times reports a New Jersey state legislative committee yesterday approved plans to borrow $86.85 million for the Business Employment Incentive Program, which rewards businesses for “bringing jobs into the state”. The state rewards companies by refunding them income taxes paid by employees.

New Jersey taxpayers are now obliged to borrow money to pay businesses for hiring workers the firms would have hired without an incentive. The Federal Targeted Job Tax Credit program available from 1978 to 1994 provided a similar incentive. An audit by the Clinton administration's Office of Inspector General, U.S. Department of Labor came to the following conclusion and Congress killed the program:

We found the tax credits did not induce employers to hire members of target groups they might not otherwise have offered jobs. Nationally, we project 92 percent of those individuals for whom employers could have claimed a credit would have been hired regardless of the tax subsidy.

The program largely subsidizes the wages of those who are hired irrespective of their eligibility and the availability of a tax credit. Consequently, for our audit period, we estimate the program cost three times the amount that it returned in economic benefits.
Just as the federal TJTC was a waste of taxpayer’s dollars, so too is New Jersey’s Business Employment Incentive Program. And to add insult to injury, the state proposes to borrow money to fund the program, unbelievable . This is just another example of financial mismanagement and waste of tax payer dollars by our representatives in Trenton.

Businesses can apply for grants for as long as 10 years equal to up to 80 percent of the income tax withholdings from their new jobs. Companies must create at least 25 new jobs, though high-tech and bio-tech companies must create at least 10 jobs.

Ann G. Flynn, director of the Treasury Department's public finance office, said the bonds would be paid back over no more than 20 years. She said the bonds will be sold with either a 7 percent fixed interest rate or an 18 percent variable rate, depending on the market.

The incentive program was funded annually through the state budget. But in 2003 then-Gov. James E. McGreevey proposed and legislators approved borrowing money to fund the grants, contending the borrowing would give confidence to the business community that the program had stable funding.

Businesses can apply for grants for as long as 10 years equal to up to 80 percent of the income tax withholdings from their new jobs. Companies must create at least 25 new jobs, though high-tech and bio-tech companies must create at least 10 jobs.

A 2003 study questioned the program's effectiveness, finding the state paid $10.9 million to companies that laid off 2,794 workers.



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