Worcester Business Journal

wbjournal.com | January 21, 2019 | Worcester Business Journal 13 C o m m e r c i a l R e a l E s t a t e F O C U S Tax breaks necessary to competitiveness Cities and towns like Worcester, Gardner and Marlborough frequently give out tax breaks to entice companies to either move or expand in their communities. Other communities in the region use them sparingly, as critics argue tax breaks mostly go to companies with significant profits who would move into the communities regardless of any tax break. When polled online, the majority of WBJ readers said tax breaks are vital to economic development. F L AS H P O L L Should Central Mass. governments offer business tax breaks? Yes. They are an excellent business recruiting tool. 19% Yes. Nearly every community nationally offers these deals and Central Mass. has to as well just to stay competitive. 43% No. Communities should instead strive to lower the business tax rate for everybody. 32% 6% No. Businesses in the position to move or expand don't need tax breaks. medical soware company Waters Corp. expand. Boston Scientific got a tax break from Marlborough in 2012, during a year when it reported profits of $441 million. Laser manufacturer IPG Photonics Corp. got a tax break from Oxford last year when its net income was $348 million. Playing the flawed game It's not always clear whether compa- nies move or expand because of a tax break, said Michael Goodman, the exec- utive director of the Public Policy Center at UMass Dartmouth and a member of the state's Economic Assistance Coor- dinating Council, which reviews tax breaks. Goodman said the talent of the local workforce is oen a major deciding fac- tor when firms chose where to locate. Tax breaks are "a tool in the toolkit," Goodman said of tax breaks. "It's not the only tool." Tax break agreements are meant to benefit both communities and busi- nesses. A company typically agrees to hire a certain number of workers or invest a certain amount of money in a facility, or oen both. In return, a city or town lets a business pay less in property taxes than they would have otherwise by giving a discount on the additional value they brought to the tax base. ese deals keep companies from having to pay much of the additional tax payments they'd otherwise have to give to the city or town where they're located. Tax breaks are a flawed method of GE Heatlhcare Life Sciences got a tax break to open a facility at a former Digital Equipment Corp. office in Marlborough. supporting the economy, Jensen said. Public money sacrificed for tax breaks would instead be better spent on invest- ments in education, broader tax cuts or more targeted programs like workforce development. "Even if the company was swung by the incentive, many studies find that these programs lose money," Jensen said, criticizing tax breaks in particular for retail uses. ose uses, he said, don't really create new economic activity in an area, instead simply causing people to spend at one shop instead of another. David Merriman, a professor of public administration at the University of Illinois Chicago who has closely studied tax policy, criticized tax deals for another reason: ey oen simply result in moving jobs from one area to another. A key question to ask for tax breaks, Merriman said, is what would happen to a particular site if tax breaks weren't used to bring jobs or new development. Oen, he said, tax deals are given for properties already in prime locations. "Cities are typically in a weak position when they're negotiating these deals," Merriman said. at's because cities are likely competing with their neighbors, he said, and municipal leaders are eager to get headlines for bringing a new business to town. "If you don't play that game," Merriman said, "you're letting your constituents down." "Offering tax breaks would help recruite new busineeses. Creating a better business atmoshpere will prevent others from leaving." "Worcester's business tax rate is not competitive to begin with, so they need to offer breaks to attract new companies. Worcester should strive towards a single tax rate for all residents and businesses, as it not fair that local businesses carry an unbalanced burden." "Tax breaks are an excellent tool, but that doesn't mean they are properly used. Tax breaks tied to job creation don't necessarily provide the promised benefits to locals." COMMENTS: W

• Cover