Bet Your Sweet BEIP

State tax breaks for private companies date back to 1791, when a Paterson investor group headed by Alexander Hamilton received a tax shelter and exemption from military service. Abandoning a modern tax-break-the Business Employment Incentive Program (BEIP)-would cost New Jersey jobs and tax revenue, according to a statecommissioned report by Rutgers University economists. The BEIP program returns a portion of a company's state income taxes as an inducement to create jobs by relocating to New Jersey or expanding operations here.

The review, by Rutgers economists Joseph J. Seneca and James W. Hughes and state Commerce Commission economist George R. Nagle, was commissioned in response to withering criticism of BEIP from New Jersey Policy Perspectives, a Trenton think tank that recommended terminating the program unless a study could show it was cost-effective.

The Rutgers report said a BEIP grant that generated 100 new jobs would add $18.4 million over 10 years to the state economy in the form of investments and state and local taxes. That would dwarf the projected $102,300 10-year cost of the grant. In an interview with NJBIZ, Seneca disagreed that BEIP amounted to corporate welfare. "No dollars are disbursed until the jobs are created," he says. "These are prudent and effective policies."

However, the report did call for changes in the program. Among other things, the economists said BEIP grants should require companies to sustain their net job increases for a specified period, and should be capped at the proposed total of jobs created.