Topic: New Jersey Economic Opportunity Act of 2013
Executive Summary (Included for Reference --- Don?t Do)
Topic Overview and Thesis
?Brief description of Economic Opportunity Act of 2013, and what policy makers hope to accomplish
?Based off of past scholarly research, this paper will attempt to analyze whether or not the factors leading to employment growth that are seemingly addressed by the Economic Opportunity Act of 2013, will have a net positive impact on local economic development in New Jersey.
o Four-part Analysis
1.Detailed description of the Economic Opportunity Act of 2013
2.Synopsis of past scholarly research on the effects tax subsidies have in attracting industry and creating jobs, and how this relates to the Economic Opportunity Act of 2013 to the extent of what effects tax subsidized programs have on economic development
3.Examples of similar economic development models used on the federal level or in other states
4.Based upon the above three points, a description of opportunities and constraints concerning the implementation of the Economic Opportunity Act of 2013
Section I: Introduction & Methodology (1-1 ? Pages)
Why is this important?; Description of Theory & Methodology
?EOA?13 is revolutionary economic development policy. It is important to understand the intricacies of the policy framework, in order to plan for what the effects of comprehensively restructuring the states incentive programs will be
?EOA?13 acts as a duel mechanism in initiating economic development at the local level
oThe policy addresses growth directly through the offering of a job creation tax incentive exemption that theoretically should attract industry to the employment incentive zones and effectively cause a rise in overall employment for the state of New Jersey
oIncreasing employment will act as a baseline catalyst for economic development through the consumption of vacant office space, and stimulate additional growth through a myriad of multiplier effects
?Analyze past scholarly research conducted on the effectiveness of state tax incentives in generating economic growth, to determine whether or not EOA?13 will have a positive impact on local economic development in New Jersey (Section II)
Subsection I: ---Leeway into Section III ---- History of Tax Incentive Financing (Use background section in Buss Article as a reference); Proposed Model of Analysis
(1-1 ? Pages)
?Brief history of tax incentive financing
?Social factors vs economic factors and the theoretical effects each sub-group has on the attraction of industry and employment growth
? Education level of employment base residing in study area
? Diversity in population
? High income tax rate
? Population density
? High per capita income
Section III: Economic Opportunity Act of 2013 Detailed Overview (3-4 Pages)
; Type of Economics; Reformation of Policy
?Description of what policy makers hope to accomplish
of the combination of five incentive programs into the New Jersey Assistance Program & Economic Redevelopment and Growth Grant Program
?Policy Action: A reduction of the eligibility threshold; an expansion of the qualified zones; an increase in the amount of incentives offered
?Place vs people based economics argument overview (EOA ?13 = location based economics)
?What is a job creation tax incentive exemption and what are some other incentive tools that have been used by states and the federal government?
Section IV: Theoretical Analysis
: Effect of Tax Incentives on Economic Growth (3-4 Pages)
Tax incentive ideology and theory
?Good policy argument ? from the policy maker standpoint, there are seemingly no negative outcomes
? Possibility of attracting outside firms (competitive states theory)
? Counteract regressions in the economy
?Defense mechanism (unknown intent of industries & competition between states)
?Rescue failing firms
?If there is an underutilization of public resources (how far do the boundaries of public resources span?)
?increased future consumption? exceed the costs
?amount of subsidization? (important to note: cost benefit analysis
is the most widely used mechanism for determining whether or not tax incentives are economically justified; could this be a problem?)
?If job growth is generated in low-employed areas
?If there is greater economic efficiency (agglomeration economics)
?If industries use subsidies to reinvest during economic regressions
?No research exists proving there is a positive correlation between the offering of tax incentives and economic growth
?There has been an overall neglect to secure funding on the part of the policy makers to evaluate the effects of tax incentive programs (good policy argument; tax incentives are beneficial regardless of whether or not they produce a positive outcome; produces the appeal to the general public that policy makers are action-oriented)
?Tax incentives are short-term policy mechanisms. They may show gains over the short-term, but attributing economic gains to TI programs is negligent of the long-term structure of the economy
?The amount of subsidies offered are too insignificant to have any real impact on corporate decision making
Two resources for theory subsection (synopsis of theory arguments):
1. Buss, Terry. 2001. The effect of state tax incentives on economic growth and firm location decisions: an overview of the literature. Economic Development Quarterly 15, 1: 90-105.
2. Wasylenko, Michael and McGUIRE, Therese. 1985. Jobs and taxes: the effect of business climate on states? employment growth rates. National Tax Journal 38, 4: 497-511.
Section V: Examples of Similar Economic Development Models Used on the Federal Level and in other States (3-4 Pages)
Section VII: Opportunities & Constraints (SWOT Analysis
) (3 Pages)
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Appendix 1: Economic Incentive Program
New Mexico: "High Wage Job Tax Credit."
FY 2011 $9.3 Million
FY 2011 $9.3 Million
Louisiana: "Severance tax Exemption for horizontal drilling"
FY2007 $285, 000
FY2010 $239 Million
Hawaii: "Renewable energy tax credits." 8
FY2010 $34 Million
FY2013 $260 Million
Appendix 2: State used 15 most Common Tax Incentives between 1986 and 1996
Change from 1986 to 1996
Tax exemption from corporate income
Tax exemption from personal income
Excise tax exemption
Tax exemption from Capital & land improvements
Tax exemption on Machinery & equipment
Tax exemption on Goods in transport
Tax exemption for manufacturers' inventories
Sales and use tax exemption on new equipment
Tax exemption on raw materials for manufacturing
Job creation tax incentive exemption
Tax incentive for industrial investment
Tax credit for specified state products
Tax stabilization agreements
Tax exemption for research & development
Base Amount per employee
Maximum Amt per employee
Maximum Aggregate Award (assumes 10-yr max. award)
Passaic, Camden Trenton, Paterson ("GSGZ cities")
Other Priority Areas
Other Eligible Areas