Trump Carrier deal mimics NJ economic policy

Donald Trump’s agreement with Carrier to keep 1,100 jobs from moving from Indiana to Mexico is prompting fresh debate about New Jersey’s aid packages to ailing companies — help that critics often brand “corporate welfare.”

Carrier will get $7 million in Indiana-provided tax breaks to stick around. New Jersey officials have been under fire for similar subsidies — under a program that’s awarded more than $7.1 billion in special tax breaks since January 2010, when Republican Gov. Chris Christie took office.

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Andrew Sidamon-Eristoff, who served as state treasurer under Christie from 2010 to 2015, said he considers the programs at best a necessary evil — one that fuels a never-ending cycle of the kind of bailouts deployed by Trump.

“I am a career-long skeptic when it comes to corporate tax incentives,” Sidamon-Eristoff said. “They foster or feed into a race-to-the-bottom culture of competition between jurisdictions that ultimately benefits only those interests with the political sophistication and or clout to access the benefits. To industry’s and consultants’ cynical delight, no one jurisdiction can afford to unilaterally disarm.”

“The trick is play smart and avoid getting ripped off too much,” he said about such state-backed tax deals.

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The New Jersey tax breaks will cost New Jersey an estimated $2.8 billion in revenue through fiscal year 2020. Nonetheless, New Jersey has lagged in job growth. The state didn’t recover all of the jobs lost in the Great Recession — including to lower-cost rival states — until this past June. That’s seven years after the recession ended.

The updated enabling legislation in New Jersey — the 2013 Economic Opportunity Act — was passed with bipartisan support and championed by state Sen. Raymond Lesniak, D-Union.

But he draws a distinction between the New Jersey effort and Trump’s intervention in Indiana, which is believed to include promises — or threats — related to Carrier’s parent company, federal defense contractor United Technologies.

Lesniak said New Jersey’s program “is a far cry from Trump’s tough guy campaign to penalize companies for moving jobs out of the country. Instead, it rewards a company for not moving them out.”

Lesniak said New Jersey has a “net benefit test” to determine if the revenue produced by the retained employees is greater than the tax break.

“If Indiana runs those calculations and there isn’t a net benefit, it’s a bribe and Indiana got fleeced for a photo op,” Lesniak said, referring to the Republican president-elect’s joint appearance with Carrier officials in Indiana on Thursday. “In any event, individual tax incentives only work state by state and while they can be beneficial for a state, at the macro level they are a marginal benefit.”

Vying for jobs

Christie spokesman Brian Murray said the administration “has certainly leveraged (the use of economic incentives) to bring in businesses and retain businesses, along with their jobs.”

Murray said awards since 2013 have an expected creation of more than 33,300 new jobs and 26,100 construction jobs, and retention of more than 26,600 jobs that were “at risk of leaving the state,” he said.

But saving or creating jobs with the awards cost taxpayers an average of $59,000 per job since 2010, according to a study by New Jersey Policy Perspective, a left-leaning think tank.

The Trump-Carrier deal gives $6 million in tax credits and a $1 million state grant to the Indianapolis-based manufacturing company to prevent relocating the jobs from the Hoosier State to Mexico. That’s an average of $6,363 per job saved.

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Analysts said maintaining a good relationship with the incoming Trump administration also likely played a role, because United Technologies has federal contracts worth $6.7 billion.

Jon Whiten of New Jersey Police Perspective called Trump’s deal with Carrier “in many ways a splashier iteration of the failed economic development policies New Jersey’s leaders have pursued over the past few years.”

“A corporation threatens to leave and the government provides generous tax breaks, giving a boost to corporate bottom lines while draining revenues and giving political leaders a ready-made opportunity to claim they are working hard to grow the economy,” Whiten said.

Analysts said Trump’s action in Indiana is likely no more than a spot solution to address underlying Rust Belt pressures that have led to a reduction of manufacturing and other high-wage jobs.

A better path

Economist Murray Sabrin of Ramapo College said the better long-term fix is Trump’s proposal for lowering the federal corporate tax rate to 15 percent, from 35 percent.

“To lower that tax rate could be such a boon to the economy, he wouldn’t have to go state by state,” said Sabrin, who ran for governor in 1997 as a Libertarian. “That would stop companies from going to other countries where tax rates are lower.”

Trump, during his campaign against Democrat Hillary Clinton, gave no sign that he’d be in favor of dangling state tax credits to company officials looking to make exits — in fact, quite the opposite.

“I’ve watched as politicians talked about stopping companies from leaving our states,” Trump said at a Pennsylvania campaign rally in August. “ ‘Here’s a tax abatement of any kind you want. We’ll help your employees.’ It doesn’t work, folks. That’s not what they need. They have money. They want to go out, they want to move to another country, and because our politicians are so dumb, they want to sell their product to us and not have any retribution, not have any consequence.”

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Trump now says he still thinks punitive measures will have a role in future negotiations.

He warned that businesses that decide to go abroad will pay a price through a border tax on imported goods.

“Companies are not going to leave the United States anymore without consequences,” Trump told Carrier workers in Indiana Thursday. “Not gonna happen. It’s not gonna happen.”

Bob Jordan: bjordan@gannettnj.com