2013-03-07 / Editorial

Beyond the Headlines

What about creating jobs?


Rep. Justin Chenette Rep. Justin Chenette There has been a lot of talk in the news about guns, the governor and a veto buffet, but there is something we have yet to discuss; something that many elected us to do last November – create economic growth.

My bill, LD 412, an act to expand employment tax increment financing to support job creation, isn’t the smoking gun, magic bullet or any other metaphoric phrase used to describe the be-all-end-all solution. It is, however, a step toward creating a regulatory environment that truly means what that sign out by the highway says “Open for business.”

The Maine Department of Economic and Community Development describes the Employment Tax Increment Financing, or ETIF for short, as a state program that helps new and established Maine businesses hire new employees by refunding 30 to 80 percent of the state income tax withholdings of qualified employees for up to 10 years. The reimbursement rate rises with the level of local unemployment for standalone ETIF programs, while certified Pine Tree Development Zone businesses automatically receive the highest rate (80 percent). The intention of the ETIF program is to incentivize the creation of quality jobs that may not have otherwise been created at a certain wage threshold.

The legislative intent behind this is to expand a currently successful tax break to include the potential for smaller businesses to apply for the incentive that many mediumsized businesses have already been using. Under the current program, non-retail, for-profit businesses that add five or more full time employees over a two-year period can participate. I am requesting that the language be changed slightly to the creation of two or more full time employees over a oneyear period in order to receive the financial incentive.

In 2011 alone, there were 93 requests from businesses, costing the state a total of $9.5 million for more than 6,700 jobs created. This equates to approximately $1,427 per new job created. To put that number in perspective, it’s less than what state representatives receive for constituent services allowance; $1,500 to communicate with you.

According to the Performance Audit of Economic Development Programs in Maine from the Office of Program Evaluation and Government Accountability, it is estimated that between the years of 2003 and 2005, the cost of 46 programs that included tax incentives and exemptions, totaled more than $602 million. Of that rather large number, only about $5.4 million represented the employment TIF program. For that investment, the state helped businesses create an estimated 5,138 jobs in that timeframe alone.

I can’t speak for the other $596 million in other programs and incentives. That is a question for the Maine Revenue Service, which audits the implementation of such initiatives, but $5.4 million for 5,138 jobs seems like a great bang for your buck. In the same December 2006 report, the organization cited 87 percent of all tax incentives as high-risk investments. Guess where the ETIF program fell into? The 13 percent of tax incentives that were labeled as medium risk. I think that is important to point out, so that we don’t lump the other riskier tax breaks that we’ve been hearing about in the news to one that is fulfilling its intent by creating jobs in addition to being less risky on our end to implement. I am open to, however, language amendments in the bill to ensure a proper independent review of these businesses that agree to the conditions of the ETIF program to ensure that mismanagement of taxpayer money or fraud does not go undetected.

The key, is we are getting a substantial return on our investment. We are taking people off of unemployment and into a job, enabling individuals to purchase goods and services within our communities. That is the kind of stimulus we so desperately need to expand.

With 50,000-plus Mainers looking for work, it is our job as state officials to help create the environment where economic growth and job creation can take place. Even if we expand ETIF, it doesn’t guarantee these newly-ableto apply businesses will use it. There are so many challenges our small businesses face on a day-to-day basis just staying afloat, let alone trying to make enough profits to hire new employees and expand their operations. If this program expansion can create just one new job for less than it takes for each legislator to communicate to the public, it’s money worth spent. Think of it as a short-term loss of initial revenue for a long term investment pay off. Let me know what you think.

Justin Chenette is the state representative for district 134 in Saco. You can get legislative updates about the work out of the 126th Legislature at www.justinchenette.com, Facebook.com/justinforsaco, and Twitter.

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