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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > June > 28 > Entry
Editorial: Employees to pay taxes to NCR
Georgia is paying about $50,000 per job to entice NCR Corp. to move its world headquarters to that state.
That’s not out of the norm for incentive packages — or shakedowns, as critics would call them.
The State of Ohio and Columbus-area governments paid in that neighborhood last year to keep NetJets from flying south. That’s also approximately what Ohio’s Third Frontier program (which seeds research efforts designed to create spin-off companies) is costing per job created, according to state Sen. Jon Husted.
One way of looking at the NCR deal is that the employees who have to move will actually be the ones financing the cost of wooing the company. That’s because almost $80 million of the $100 milllion-plus incentive package that Georgia put up represents state income taxes that will be deducted from employees’ checks over five years, but that NCR will get to keep.
Like most states today, Georgia isn’t just sitting on $80 million that it’s aching to give away. Yet, it didn’t have to put up much cold cash to get NCR. Rather, it’s temporarily foregoing income tax money it would have been due.
One can argue that any time a state gives a tax break, all state residents end up footing the bill in one way or another. But when a tax break is so precisely tied to what a company’s employees owe the state, it easy to see how they might think they’re the ones really putting up the cash.
It also shouldn’t be lost on anyone that under the Georgia plan, NCR has every incentive to move every last body out of Ohio. Leaving people in Dayton is leaving money on the table; the bigger its workforce in Georgia, the more money the company will get to keep.
If it turns out that Georgia’s tax on individuals is more than Ohio’s, that’s all the better for the company, though not so much for its employees.
Ohio has its own version of Georgia’s “Mega Job Tax Credit.” One program applies to companies that are threatening to leave; another is available to companies that are considering coming to the state.
In fact, $28.6 million of the $31 million incentive package that Ohio offered NCR to stay was a tax credit that was calculated on the estimated state income tax NCR employees would pay. Ohio offered to subtract from NCR’s state tax bill 75 percent of what its workers here would have owed the state during the next 10 years.
The national trend of tying tax breaks to what workers owe the state is a tidy way for states to make sure that companies receiving incentives really are producing the jobs they’ve promised to create. It’s hard to cheat if a business tax credit is linked directly to the state taxes a company is withholding from its employees.
Ohio’s business tax credits — which critics say have essentially become an entitlement — are harder to get for companies that are threatening to move than for new businesses wanting to set up shop here.
The “retention” incentives can only be given to businesses with 1,000 employees and that are making a capital investment of $100 million. (In the pending budget bill, the rules would be available to smaller companies and require less of an investment in the state.)
The “job creation” subsidy, on the other hand, can go to firms that create just 25 new full-time positions paying a minimum of 150 percent of the federal minimum wage, or that create just 10 new full-time positions paying at least 400 percent of the minimum wage.
Georgia didn’t invent the game of poaching jobs. Ohio would have done the same thing if it had gotten wind, say, that Coca-Cola Co. wanted to move here.
But the country isn’t any better because the states are fighting to see which one can demand less of its corporations.
Permalink | Comments (1) | Post your comment | Categories: City of Dayton, Economy, Editorials, Ellen Belcher, Local Business
Comments
By RWE
June 28, 2009 8:04 AM | Link to this
Another good reason to eliminate income taxes. With a sales tax, this type of incentive wouldn’t be available.