Incentives Need To Be Aligned To Work

An article on Friday, October 22nd in the New York Times on page A14 described a number of Governors who are running for office, or are already incumbents, who are recommending or providing tax breaks to create jobs. Frank Caprio in Rhode Island (yes, the guy who told the President yesterday to "go shove it") is recommending a Business Finder Tax Credit that would provide $1000 for a company who brings a new business to Rhode Island and both companies would share a $10,000 reward if the new business hires 20 or more people. He also wants to waive the filing fees for any new corporation that creates a new job.

The Iowa Republican candidate wants to waive state income taxes for start-ups for their first three years (this is great, but I'm not sure there is a realization that most start-ups don't make a profit in their early years so there aren't any taxes due). the recommendation also wants to waive start-ups paying sales taxes up to $50K in their first three years. That could be good on their capital purchases. but, $50K in sales tax breaks would mean that the company would have to spend a lot to get the full benefit. Costco tables and chairs, a few PCs with a 5% sales tax takes a long way to get to $50K of savings.

Other candidates in Illinois, Florida and Maryland are trying to come up with their own ideas.

In 2006, in our book; Talent Force: A New Manifesto for the Human Side of Business (can be found at http://www.amazon.com/gp/product/0131855239/qid=1136138630/sr=2-1/ref=pd_bbs_b_2_1/104-1629927-8463150?s=books&v=glance&n=2 ) Hank Stringer and I called for "Free Talent Zones". This is where states could attract talent and therefore would want to relocate to these states. The incentives we recommended would not be about tax breaks to companies (which one side or another seems to have a problem), but instead provide incentives to workers directly. Give them a break on state income taxes, real-estate taxes, education fees, etc. Allow a company so many of these incentives for new hiring and believe me, the talent will come and the companies will will have incentives to hire. Imagine being able to recruit telling candidates about these types of incentives.

Rather than postulate on things that don't seem to make a difference or are so small in impact, I sure wish our politicians would be bold enough to think outside of the box and focus on those things that would really make behaviors and actions change. "Cash for Clunkers" was a success because the incentives went to the buyer, not the seller. Sellers finally picked up on it and then made it into an advertising bonanza and all parties got the benefit.

Let's try and think like this for talent, employment and rhe real creation of jobs!