RI Unemployment Dropped to 7.9% in June

States pirating other states for existing businesses and jobs is nothing new.

The 1950s saw heightened concern about the growing number of footloose companies that were abandoning long-standing industrial locations in the north to take advantage of benefits being offered by states such as Mississippi. Then-Sen. John F. Kennedy of Massachusetts decried southern “raiding,” especially in the textile industry. Organized labor took notice. In 1955, then-named American Federation of Labor published a pamphlet with the title “Subsidized Industrial Migration: The Luring of Plants to New Locations.”

In Massachusetts, the free market-oriented Pioneer Institute likened interstate lures to “playing the lottery” in examining the National Establishment Time-Series Database for 1990-2007.

Although the Bay State has had a small net loss of jobs to interstate moves, it loses and gains jobs from mostly the same states (New Hampshire, New York, Rhode Island and Connecticut all rank in the top 5 for both directions). In addition to some cautionary findings about the Bay State’s trends, the Institute concluded, “The majority of establishments that moved to the state did not receive special incentives from the state to do so. Therefore, public thinking and public policy with respect to economic development should be reoriented to place less emphasis on interstate relocation.”

Ballooning state-budget deficits are costing millions of jobs, affecting every state, with no regard for region or corporate tax or incentive regimens.

For example, a study of job loss due to the growing trade deficit with China names New Hampshire, California, Massachusetts, Oregon, North Carolina, Minnesota, Colorado and Texas among the 10 most affected states - proportionally, and in that order. That should be a sobering fact for states such as New Hampshire (that so shamelessly pirates jobs from Mass.) and Texas (that openly lures companies from Mass. and other states).

Several states have rules prohibiting subsidies for intrastate job relocations. Among them, are two in New England:

• Connecticut:

o Enterprise Zone and Urban Jobs Tax Credits

o Urban and Industrial Site Reinvestment Tax Credit

• Maine:

o Employment Tax Increment Financing

Several states have major state-subsidy programs with restrictions on intrastate job shifting. Among them, are two in New England:

• Rhode Island:

o Corporate-income tax-rate reduction for job creation

o Enterprise-zone tax credits

• Vermont:

o Economic-advancement tax incentives

o Employment-growth incentives

In 2011, the Boston Globe published a profile of the State of New Hampshire’s top business recruiter, Michael Bergeron, labeling him a “full-time thief.”

Bergeron, who was said to have removed the state seal from his car to be less conspicuous when visiting prospects, claimed to have lured dozens of firms from Mass. to the Granite State. Brazenly, he posted the Globe profile on his agency website.

In 2010, Connecticut Governor Jodi Rell faced allegations of inciting a border war by writing to New York City-based hedge-fund managers.

“I am personally inviting you and a few of your colleagues to meet with me. We have much to discuss!” Rell added. “The meeting will be intimate, direct and private.”

Art Imitating Life

Connecticut’s use of a tax credit to lure media-production companies was satirized, in 2011, in the I Heart Connecticut episode of the popular TV show “30 Rock.”