With tax reform a high priority in this legislative session, the state Legislature will be reviewing several weak programs. One program legislators set their sights on early is the Job Opportunity Building Zone (JOBZ) initiative. The measure, enacted in 2003, gives tax breaks to companies for creating more jobs.
The goal of the program is sound, but a recent audit by the Legislative auditor's office found many problems with the way the program operates. The JOBZ program needs serious reform in order to justify its continued operation, including measures to make the program accountable.
The program suffers from a serious lack of oversight. Local participants do not need to adhere to a state budget review or budgetary guidelines. The obligations businesses must comply with are set by each community, resulting in local areas competing unequally against one another.
The beneficiaries of JOBZ likewise profit unevenly from the program. According to the report, 4 percent of JOBZ companies received almost half of the total tax deductions, while another 44 percent of companies garnered 2 percent.
Apparently, the Department of Employment and Economic Development (DEED) also overstated the impact of actual job creation with JOBZ by about 20 percent, sometimes double-counting jobs created and jobs retained. The actual value is difficult to calculate, but the cost per job may average double DEED's claims.
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The auditor's report also shows many of the businesses might have expanded even without the tax breaks. More than six in 10 of the businesses would not have relocated to expand business, regardless of JOBZ.
JOBZ was created to encourage economic growth in Greater Minnesota, especially the northern part of the state. At its inception, northern Minnesota had one of the highest rates of unemployment. The auditor's report, however, showed northern Minnesota benefited less from JOBZ than other areas.
When the government gives tax breaks to companies, it comes at an added expense to everyone else. If the breaks create more net jobs, they may be justified. But without accountability the end result is a squandering of revenue sources.
-- Park Rapids Enterprise
