Tracking Tax Incentive Effectiveness, continued

As I have looked through the database in Illinois, I have come across two possible problems with the system, one for which there is an easy remedy and one which appears somewhat intractable.  The first is that companies are able to forecast their future employment increases.  For example, looking at the first entry for Advance International, Inc., the company forecasted an increase in employment of 150 jobs but only 3 materialized (and at only $14,040 per year salary).  In the final section of the report (available in pdf), the company reports the number of jobs it expects to create over the next year.  For Advance International, Inc., the company expects to start 147 new employees on June 1, 2006 (at $14,040 average salary per year), exactly the amount needed to make up for their deficiency from the projected employment creation upon signing the agreement to receive tax credits.  This allows companies to delay accountability by forecasting employment growth up to their "quota" for the next year.  However, as long as the database remains available, the public can keep informed about the compliance of various companies with their agreements.  In addition, to control the incentive to produce just enough employment to comply with agreements for awards, the governments may be able to extract higher promised employment increases in new tax credit agreements.  The other problem, however, is not so easily solved.  The problem is that state-by-state databases do nothing to diminish the inter-state competition for jobs and the tax credit shopping behavior of companies.  Unless either the databases are shared between states before awarding new tax credits for companies (which could use threats of withholding future tax credits unless jobs are created), companies can still pit states against each other in the competition for jobs.  States still need to not only account for whether jobs are moved within the state (like the Illinois system does), they need to assess whether the jobs are actually new jobs or are just jobs transferred from another state.  This is a difficult problem because state government's primary goal is to demonstrate that they are bringing jobs into the state and the movement of jobs out of other states into the home state are not judged differently than newly created employment.  $1 used to create a new job is far better money spent than $1 spent moving a job from Ohio to Oregon for the national economy.  State tax credits should be focused on creating new employment, not moving jobs from one state to another.  The state-to-state movement via tax cuts will only increase the power of companies to lead a race-to-the-bottom in terms of state taxes and leave all the states in a worse budgetary state.  The best way to deal with this would be to not only ask whether the employment created is the result of moving jobs within a state, but also to require reporting on whether the jobs created are moving in from other states, rather than being created.  The Illinois system benefits Illinois, but may harm Maryland.  For the system to benefit America as a whole, it must also have a national reporting focus.