Verizon Stays With Tax Breaks

In this article at NJBiz.com, reporter Evelyn Lee discusses Verizon's decision to stay in Newark.

The New Jersey Economic Development Authority announced late last month that Verizon would be the first company to receive tax credits under the [Urban Transit Hub Tax Credit] program, which Gov. Jon S. Corzine created in January to boost private investment and create job growth in urban centers. The corporation will receive tax credits of about $2 million annually for 10 years to invest more than $25 million and employ more than 700 people at its Newark headquarters at 540 Broad St., according to the EDA.

700 people employed in downtown Newark. Say they average $30,000 each in annual salary. That yields 21 million dollars annually flowing into Newark.

That money is multiplied by the fact that these employees buy stuff, rent apartments, and, yes, pay taxes.

It's also multipled by the money Verizon will pay to Social Security, to their landlords (a 10-year lease to Accordia Realty Ventures), in property taxes ($4.2 million in 2007, though perhaps that's less under this plan), to the power company, and so on.

It's multiplied by the expenditures of businesspeople, like the cab rides they'll take between the airport and the Newark office -- and the money the cab drivers will spend on food, clothing, shelter, and luxuries as well, and get taxed on those items, too.

I don't know whether the $25 million is on top of that or a part of that, so I'll ignore it for now.

In short, that $2 million in annual "corporate welfare"* will have a return on investment of 1000+% to the state in salaries alone, and probably more like 2000-3000% when you add in all of the multipliers.

Do you want to know what an investment of $2 million in additional welfare payments would be? About $600,000 in government overhead (maybe 20 jobs) and 1.4 million in payments (call it $20K each to 70 people) to demoralized people who have a hard time finding work.

Some people are complaining because in the current economic climate Verizon might have decided not to move. Don't let them fool you. During an economic crisis, companies love to cut costs, and other parts of the state would be happy to find a company that would bring them 700 jobs. The investment in moving isn't risky for Verizon.

And even if they would have stayed without the cuts, isn't the Return on Investment high enough to want to make sure?

And if it's good for the state to let Verizon keep more of its money, wouldn't it be good to do that for more businesses?

This story isn't about Verizon at all. It's about Newark, and New Jersey, and the benefits of letting businesses keep more of the money that they earn. It's about lower taxes and their economic benefit.

Governor Corzine, you don't need a special program to get these benefits. Just cut the corporate tax rates and keep them low.

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* Of course, "corporate welfare" is an Orwellian term in situations like this. This form of "corporate welfare" is really just letting a business keep more of the money it makes. Nancy Pelosi asking the Treasury to help Chrysler is "corporate welfare": they're not taking in enough money to pay their bills, so the government helps them out. Of course, we call that a "bailout". Maybe we should start calling welfare programs "personal bailout" programs...

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