Don’t give GE $25m in tax credits

Monday, November 29, 2010

I received a voicemail this morning from a machine tool manufacturer in Springfield. The owner was irate about a Boston Globe report describing tax credits the state has been negotiating with General Electric. He said he could hire new workers if the state would help him invest in new equipment.

I expect the governor’s office is fielding a lot of these calls. It’s hard to understand why an administration that has prided itself on investing for long-term growth ventured down this road. As a supporter of this particular tax incentive program – and a taxpayer – I’m also disappointed. I’d like to point out what I think is the true tragedy, which media coverage of this story has missed.

The Economic Development Incentive Program has one very straightforward goal. It was created to spur redevelopment in blighted urban areas. Funding is capped at $20 million annually. (The state was able to design a $25 million package for GE by spreading the credit out over six years). With just $20 million, paying companies to simply retain jobs is shortsighted. To generate real return on taxpayer investment, these tax credits must catalyze private sector activity.

By applying this limited funding the way it was intended to be used, we could have this type of economic impact. Throughout the state there are redevelopment projects struggling to move forward in this difficult economy. Hard work has gone into Lowell’s Hamilton Canal, New Bedford’s Hicks-Logan, and Worcester’s CitySquare. To realize their potential, these projects need anchor tenants.

If the state used these funds to encourage companies to move to these locations, it could have a real revitalization impact. One-time funding to catalyze growth and development on previously underutilized land is a more strategic use of taxpayer dollars. By helping these cities become stronger economic engines, public investment could lead to more productive regional economies and long-term job growth.

If the state can’t resist the urge to shop for jobs, it’s got plenty of other funds to use. There are hundreds of millions of dollars in film, life sciences, and R&D tax credits. In contrast to these unproven programs, there is scholarly evidence that geographically targeted tax credits can contribute to urban revitalization when applied strategically. That’s why it’s so disappointing to see the state putting the limited funding available for struggling cities to such ineffective use.

Posted in: Gateway Cities

Recent Comments:

ryans820115 says on 2/21/2011 10:35 PM

“This post is spot on, instead of bribing corporations of the past to retain local jobs the state should be encouraging the development of start-up companies that will create new markets. There are also plenty of factories, mills, and plants in cities like Springfield, Holyoke and Chicopee that could be renovated into attractive sites for many of the industries you mentioned in your piece. Western Ma also has low-cost high quality construction labor-force, plenty of local colleges, and trade schools not to mention the possibility of being connected to the eastern, central portions of the state along with Hartford and RI in the medium term future when the new railway is constructed. Job creation over the course of the next two years will be up to state and local governments, they will have to create enviroments that are attractive to the businesses that will create middle-class jobs in the future and they will also have to spur demand for traditional businesses with the current state of the economy and the political situation in Washington”