Illinois Isn’t the Only Corrupt State

Illinois’s primary competition for the unsought-for title of “Most Corrupt State” comes from New Jersey and Louisiana. The editors of the Wall Street Journal provide a glimpse of what’s been going on in New Jersey:

Over roughly a decade and a half, New Jersey’s Economic Development Authority has approved—though mostly not yet paid out—$10.9 billion in tax incentives tied to 161,804 new jobs and 80,027 retained jobs. But “key internal controls were lacking or nonexistent for the monitoring and oversight of recipient performance,” the audit says. As a glaring example, the development authority relied on jobs figures provided by the businesses receiving tax credits without verifying the data.

One company won $29 million in incentives even as its “statewide employment actually declined during the award performance period,” says the audit. Another company didn’t submit timely annual reports, and the state didn’t notice until alerted by the comptroller’s office. A third “hired six individuals in the last two weeks of its reporting period presumably to meet the number of employees required by its award agreement.”

The audit closely inspected a sample of 48 projects that the authority had certified as hitting their targets, accounting for 8,713 promised new jobs and 6,657 retained jobs. Nearly 20% of those claimed employees couldn’t be substantiated: 726 didn’t appear in the wage data reported to the state’s labor department; 261 did not seem to be working full time; 644 were counted by two incentive programs simultaneously; and 1,362 didn’t have enough information to be verified.

To put the dollar figures in perspective, New Jersey’s corporate tax produced about $2.1 billion in revenue in 2017. Individual and corporate tax rates were raised again last year, after the Democratic Governor struck a “compromise” with the Democratic Legislature. Businesses are taxed at a top rate of 11.5%, the second highest in the nation. That’s one reason New Jersey has ranked dead last, for several years running, in the Tax Foundation’s index of state business climates.

Rather than emphasizing the need for cutting taxes as the editors do, my reaction is that good intentions are not nearly enough, most of the time the intentions aren’t that good, and policies to promote growth need to be followed up with actual difficult, grueling, unrewarding work by state bureaucrats. That almost never happens.