Business Plans

Comes now Hizonor, with an "economic development" plan for the State of New Jersey.

Let’s assume that one owns a smallish business – doing well, thank you very much – which requires a new facility. One looks around at the various northeastern states – we’ll leave the Carolinas and off-shore out of the picture for the moment, as that would make the competition totally unfair – to see which state provides the most welcoming – read, profitable – environment.

First, you wish to construct a new building. Under the Gov’s proposal, you’d be offered a subsidy (of some sort) to relocate to Newark or Camden. But you’d prefer the sort of scenic site readily available along Routes 78 or 80 in PA, so you look in the Highlands. BUZZZ, stop, sorry, you lose, but thanks for playing. However suitable a particular site might be for development – let's say one right next to an existing, similar structure in Mount Olive -- you simply can’t build.
Or you find a site 6" outside of the Highlands preservation area, but, alas, a stream runs 299' from its boundaries. Too bad.

Assuming that you’ve made it this far, and haven’t already fallen into the welcoming arms of a competitor state, after much effort, you locate a suitable lot which the locals think suits your needs and probably won’t trigger the wrath of scores of DEP bureaucrats, and you begin to assess the economics.

One of the aspects of the Governor’s plan is to improve the math scores of New Jersey children. Proving that you’ve taken this admonition to heart, you start adding the taxes New Jersey throws at a business and its employees, and you compare them to Delaware or Pennsylvania. Coming up with a seemingly absurd answer, you put down the pencil and pick up a calculator, just to confirm your math. Sure enough, you find you were right. Highest property taxes in the nation; highest sales tax in the nation; highest marginal income tax in the region, among the highest in the nation; huge corporate taxes, doubled under the last administration.

And if you, the Boss, want to live near where you work, and make more than half a million a year, the state wants about 9%. PA takes a little over 3%. DE none at all.

How long does it take you to choose to locate somewhere -- anywhere -- other than New Jersey?

Now, the Governor proposes to "invest" – read, tax and spend – a tad over $300 million to attract new businesses, but let’s assume that you don’t envision manipulating stem cells and don’t want to move to Newark. (At least until such time as the new Mayor proves himself better than the last one). When you open for business – assuming you finally do find a location on which construction is permitted – you and your employees are looking at a tax burden, some portion of which goes to support subsidies to competitors who moved to different locations in the same state.

Senator Lance observed, delicately, that if the Administration really wants to improve the business climate, increasing the sales tax and increasing spending by 12% represented a truly idiotic way to convey that message. While many business organizations LIKE the idea of subsidies (who doesn’t like "free" cash?), they assist only an infinitesimal number of favored businesses, not enough to make any serious dent in NJ’s overall image as a tax hell to be avoided at all costs.

Let us consider a much more effective, much less complicated program of economic development. Instead of spending $350 million or so on pork next year, or $300 million on subsidies to selected businesses, or $500 million on stem cell centers, take that billion and cut taxes. Start by repealing the fraudulently named "millionaire’s tax", to be followed by a repeal of the increase in the CBT. Effect a complete freeze on the state budget for the next five years, spending not one vershnagel more. Assuming that tax revenues will continue to rise as conditions improve, use every additional dollar to slash tax rates even further, especially on business and "the wealthy", such that, at the end of the process, we have a low, flat income tax and, preferably, no taxes on business at all. Repeal of the death tax will also help keep retirees here. With five years of stable state spending, we could seriously shrink the overall tax burden. Tied in with property tax reform proposals, a Governor with vision could transform NJ from a tax hell into a business Mecca, with companies pounding on the door to get in rather than wearing out Route 78 to escape. One wouldn’t need to subsidize Newark or Camden; business would be attracted there naturally by relatively low costs.

This will require some public explanation by the Governor. (As a businessman, he understands that corporations NEVER pay taxes; they simply include whatever taxes government levies in the prices they charge to their customers) It means foregoing the politics of envy and refusing to surrender to the spending interests.

While it’s nice to see a Governor who at least professes to be friendly to business (I seem to recall one recent Governor throwing a hissy fit and making threats when a business or two displayed the temerity to disagree with him), and there will likely be some high-profile, press conference successes, at which the political pooh bahs brag about capturing or retaining a particular firm with a particularly juicy taxpayer subsidy, most economic growth occurs away from the klieg lights, in small, unsubsidized companies, making decisions based upon real world conditions. Subsidies produce few effects; a generalized low tax, business friendly climate will produce prosperity.