Tax credits for job-creation may change business climate in Md.

The Outlook

February 11, 1996|By Ted Shelsby

GOV. PARRIS N. Glendening is asking the General Assembly to approve tax credits for firms that create new jobs in targeted growth areas -- manufacturing, research and development, transportation, communication, agriculture, mining, computer-related services, finance and real estate industries.

Under the proposal, the state would grant up to $10 million a year in credits to companies that create at least 50 new full-time jobs that pay at least 150 percent of the federal minimum wage, providing the jobs went to Maryland residents.

State officials concede they don't know how many jobs might be created but say they can't afford to wait for analyses when competitors such as Virginia already have programs in place.

Is there any evidence that such programs work? Have they succeeded elsewhere? Is the amount proposed sufficient? Is it a real enticement, or is it more a matter of sending a message that Maryland is "business friendly?"

Dennis J. Donovan

Consultant and senior managing partner, Wadley-Donovan Group Ltd.

Maryland's proposal would be a fairly competitive program, in terms of the amount of money available. I think it's good. It puts Maryland in the ballpark. I view it as a major step in the right direction.

The governor's proposal would put Maryland ahead of Pennsylvania, which doesn't have a job creation tax incentive plan.

It is a real enticement.

It is not as much as I would like to see to strengthen Maryland's competitiveness, but it is a major step in the right direction.

By not having it in the past, I am convinced that Maryland has lost a number of projects. This is not a give-away. It is a win-win situation for everybody. The more jobs that are created, the broader the state's tax base.

Oklahoma's program has succeeded dramatically. It has created thousands of jobs. Programs in Kentucky and Ohio have been extremely effective. So has Virginia's. I know for a fact that one of the major reasons that IBM went to Virginia was because of an incentive package, including job tax credits. There is no doubt about it, they do work.

Not only do they work, but if you don't have them you are at a significant disadvantage.

Brad McDearman

Vice president, PHH

Fantus Consulting

First of all, incentives need to be seen as one piece of the whole economic development puzzle. It is not going to be the magic bullet to solve all the issues. But they are a very important piece, given what is happening in the competitive marketing place.

These kind of incentives help companies offset a lot of the up-front costs that can make an investment difficult. They provide tangible benefits.

But I would say it is really more than money. They provide evidence that business is wanted by the state, which is not the message that Maryland has been sending to the marketplace.

The tax credit is a way to let the marketplace know that Maryland is serious about retaining and attracting business. And I think that is really important.

When our clients are making their final site selection decisions, it frequently comes down to a question of whether or not they are wanted. And Maryland has not been great about focusing on the needs of business and letting them know they are wanted.

It is a competitive disadvantage to the state that they don't have it because so many states do at this time and use them effectively.

The tax credit was pioneered in Kentucky. They have proved to be very effective in attracting and retaining existing businesses. Virginia's program has been very effective. That's why everybody is doing it.

Robert Koepke

Professor of geography, Southern Illinois University, and editor, Economic Development Review

Incentives, like Maryland's tax credit, are important in attracting business. They will not be the primary reason a company locates or expands in a state, but they become an additional stimulus.

The common practice among companies is to ask, very early in the site selection process, what incentives are available. But they don't really plug that into their decision making until the very end.

The decision is based on other economic factors. Does a company need the port for their business? Are the people they need in the area? Can it readily get the materials it needs to produce its product? These are the make-or-break questions.

But companies usually will come back to the incentive issue at the very end of the decision-making process. If everything else is equal, incentives can make one state's proposal a lot more interesting.

Without some sort of incentive program a state will be at a major disadvantage; in some respects you are signaling the welcome mat is not the same as that put out by other states.

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