A recent report from Good Jobs First entitled, “Paying Taxes to the Boss,” sheds light on how widespread this practice has grown. An estimated 2,700 companies now take advantage of this welfare system, fueling an economic war between states that costs employees an estimated $700 million a year in diverted tax income, the report concludes. Those who profit include corporate giants like Sears, Goldman Sachs, and General Electric.
In Illinois, the EDGE program offers a special tax incentive that can divert up to 100 percent of withheld taxes into subsidies to encourage companies to locate or expand operations in Illinois when the companies are actively considering a competing location in another state.
New Jersey’s Business Employment Incentive Program (BEIP) is among the most costly of these programs, with new grants totaling more than $73 million. Ohio and Kentucky top the list of states for the number of companies they subsidize through employee personal income tax withholding.
The practice has been around for more than a decade, and it’s continuing steadily – with six of the 22 programs identified nationwide enacted since 2009 – according to Good Jobs First, a policy resource center that focuses on economic development and "smart growth."