This is potentially a big story–and an important one. For many years, cities and states have been caught in effectively a blackmail situation–companies threaten to leave or not relocate their businesses unless the municipalities hand over a whole host of tax breaks and incentives. In return for these gifts, companies promise that all sorts of jobs will be created if they stay–promises that are rarely met. My own gut feeling is that that is simply legalized extortion–which too many politicians respond to because of the fear that the press will tag the elected representatives of losing jobs if companies don’t get what they want and leave.

    New York State has been notorious for handing over way too much to businesses, via the so-called "Empire Zones." Today, A piece in The New York Times reports on a state alert sent to 3,000 companies warning them that they may lose tax breaks because they failed to live up to the job creation promises they made:

Officials alerted about 3,000 companies on Monday that they could lose the tax breaks they received under the state’s enterprise zone program because they had failed to create jobs or invest in their areas as promised.

Warning letters sent to the companies reflected the first significant auditing and enforcement effort in the two-decade history of the program, the Empire Zones. During that period, the program has transformed from an effort aimed at pockets of extreme urban poverty to an all-purpose business program offering tax breaks to companies statewide, costing taxpayers $3 billion since 2000 alone.

Nearly 10,000 businesses are certified to participate in the program, according to officials at the Empire State Development Corporation, the public benefit corporation that oversees the program. Three thousand of those businesses were issued letters indicating that they had met less than 60 percent of their job creation or investment goals. The companies on the list ranged from large corporations like Wal Mart Stores and Lowe’s to small businesses like Zaro’s Bake Shop on Bruckner Boulevard in the Bronx and Jamaica Donuts in Queens.

    What a surprise–Wal-Mart makes the list. There is a lot more good info in this fine article, which shows that this is a huge problem and we may only have seen the tip of an unfolding scandal:

Documents provided by state officials indicated that the businesses in question, which represent only those companies with the program’s very worst record of job and investment creation, may have fallen short cumulatively by thousands of jobs and billions of dollars in investment.

    This is really nothing new, as one of the most dogged critics of the Empire Zones, Assemblyman Richard Brodsky, points out:

The findings came as little surprise to the program’s critics. Since their inception in 1986, the zones have had, at best, a limited record of success. Yet with every ostensible effort to overhaul the program, it seemed to sprout new loopholes and evolve further from its original mission.

“The program is corrupt and ineffective,” said Richard L. Brodsky, a Westchester County assemblyman who has called for it to be temporarily shut down. Mr. Brodsky’s colleagues in the State Legislature have not greeted his proposal enthusiastically, given the vast number of companies benefiting from Empire Zone tax credits all across the state. Where once the program had only 10 zones, all in decaying urban neighborhoods with high rates of unemployment and little prospect of private investment, today there are 82, including at least one in all but three counties in the state. Some have been drawn with boundaries around properties occupied by a single business.

And…

During hearings this year, Mr. Brodsky estimated that, over all, the program had created 40,000 to 45,000 full-time jobs since its inception, a number he described as startlingly low given the cost and lost tax revenue.

“This is a program that socialists would be embarrassed about,” he said.

    This program should be shut down. It’s simply a trough that business feeds at–at taxpayer’s expense–with very little, if any, benefit. You can actually argue that the 45,000 people who received full-time jobs would be better off just getting handed a check for that job–after all, they end up paying for the program through taxes, money that goes directly to corporate coffers. Sure, I’m making a rhetorical point here simply to underscore how worthless and corrupt these programs are.