Report: Tax breaks don’t create jobs in Vermont or U.S.

The vast majority of new jobs that spring up nationwide are created when people already living in a state start or expand a business — not because of tax breaks or incentives that states offer them.

Those were the conclusions of a study released Wednesday by the Center on Budget and Policy Priorities, a left-leaning think tank in Washington, D.C., that often teams up with the Public Assets Institute in Montpelier.

The report on the study is called “State Job Creation Strategies Often Off Base,” and it is the first study in about five years that examines the reasons jobs are created in a given state, according to the authors, who held a conference call with reporters Friday.

“This new information makes an even stronger case against tax cuts and company-poaching strategies,” said Michael Mazerov. He co-wrote the paper with Michael Leachman. Mazerov is a senior fellow at the organization, and Leachman is the director of state fiscal research.

“That is not where economic development comes from, and that is really not where policymakers should focus,” Mazerov said. “They should really focus on homegrown businesses and startups.”

Nationwide, the study says, 87 percent of jobs created in the private sector are “homegrown,” meaning they came from startups or existing in-state businesses. In every state, more than 80 percent of jobs created were from people or businesses already in the state.

In the median state, 11 percent of new jobs came from out-of-state companies starting a new branch, and “a miniscule 3 percent resulted from the actual relocation of pre-existing positions from one state to another.”

Startups across the country created roughly 3 million jobs a year between 1990 and 2009, the study says; businesses older than one year usually lost jobs, and “any new jobs they created were more than offset by jobs they eliminated through downsizing or closure.”

In Vermont, the think tank says, 90 percent of new jobs between 1995 and 2013 came from in-state startups, in-state businesses that expanded their current establishments, or businesses headquartered in Vermont that built a new establishment.

Four percent of new jobs came from businesses headquartered out of state that had establishments in Vermont, according to the think tank. Five percent came from out-of-state companies that established a new branch in Vermont, and only 2 percent of jobs created from 1995 to 2013 moved into Vermont from another state.

“What really struck us in the data is the great uniformity among the states in these percentages,” Mazerov said. “There’s really very little variation, and what variation there is doesn’t seem to have very much to do with rural-urban issues.”

Mazerov said the states that see higher percentages of jobs moving across state borders are often next to large cities.

He cited southern New Hampshire, which is part Boston’s metropolitan area, where he said companies move back and forth.

Erin Mansfield

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