Since 1962, Forbes Magazine has been headquartered on 5th Avenue in New York City, behind a limestone facade with Ionic columns. But by the end of the year, it’s moving a twenty-minute train ride away to a glass tower in Jersey City.
For decades, companies in New York City have moved offices across the Hudson River, to the city that has been dubbed New York’s “sixth borough.”
“You can look not too far away and see Manhattan, you’re on the water, and the rent’s a lot lower,” says Gordon MacInnes, president of local policy watchdog New Jersey Policy Perspective.
For many of those companies, there has been another, bonus factor: Tax breaks. Forbes has been approved for $27 million in tax credits by New Jersey’s Economic Development Authority. It’s a small example of a growing practice in the state, which has pledged tax incentives of $1.6 billion in the last ten months—more than in the first ten years of the millennium.
“It’s the only thing that New Jersey’s doing to crawl out of the great recession,” says MacInnes. “And so if this is the only thing you have, do a lot of it.”
New Jersey’s incentive programs have meant a spate of calls from New York City businesses to Lee Winter, director of incentives at Grant Thornton LLP. “There’s a certain back and forth, but right now I’d say New Jersey is winning that battle,” says Winter.
But how does bringing a company from New York City to Jersey City affect the regional economy?
“No one thinks in terms of the region, they just think of their state,” says Winter. “So, you know, if a company moves from New York to New Jersey, those really are new jobs—to New Jersey.”
While this interstate arms race isn’t new, the recession made it more fierce according to Greg LeRoy of Good Jobs First, a long-time monitor and critic of tax incentives.
“States and cities are spending more than $70 billion a year for economic development, and that number’s been steadily up in recent years,” says LeRoy. “There’s less money available to build infrastructure, to retrain workers, to keep classroom sizes small. Those are things that benefit all employers. And instead we’re putting lots of eggs in a few corporate baskets.”
Seth Pinsky, former president of the New York City Economic Development Corporation, defends the use of tax incentives for specific projects, such as grocery delivery company FreshDirect, which was granted more than $100 million by his agency. But he also says they were “not the optimal form of government investment,” and emphasized instead the important of long-term investment in workforce training, infrastructure and basic research.
“Tax incentives are easy to explain to people,” he says. “They’re easy to explain to businesses. They’re appealing to politicians. Long term investments are harder. Unless and until the American public itself starts thinking long term again, it’s going to be hard to turn economic development officials back towards thinking long term as well.”
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