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Seth Grossman Explains Why It's So Expensive To Run A Business In New Jersey

March 22, 2011 J

The following piece is by Seth grossman, AFP contributing blogger.

Last week, the front page of the Cumberland County edition of our daily newspaper published a front page story with the headline “Economic Frustration in Cumberland-Seeking, not finding work”. It then pointed out that “With an unemployment rate of 13%, Cumberland County is seeing no signs of an economic recovery”.

How can that be? Cumberland County is loaded with dozens of those “public-private partnerships” that both Republicans and Democrats claim are essential to create jobs and stimulate the economy in Atlantic County.

Millville gave generous loans, grants, and tax breaks to build its new shopping center, the Millville Arts District, and the Motor Sports Park.

It committed $7 million tax dollars to turn the obsolete Levoy Theater into a state-of-the-art performing arts center, just like the obsolete Landis Theater in Vineland, which was so transformed with $8 million tax dollars.

Bridgeton, Vineland, and Millville all have Urban Enterprise Zones where businesses charge only half the 7% sales tax. The money they collect goes to local businesses rather than to the state government, which is supposed to be broke.

If these “public-private partnerships” are so good, why is Cumberland County in such sorry shape?

The obvious reason is that it is simply too expensive to invest in New Jersey.

To get these sweetheart deals, companies must hire the right lawyers and consultants, and give generously to the right politicians. If they get any government loans or tax abatements, they have to hire union contractors that charge at least 50% more. Before they can do any business, they must spend
a fortune on all sorts of state and local environmental, planning, and zoning approvals. When they are in business, they must pay some of the highest business, income, sales, and income taxes in the country.

Besides that, there are lots of hidden costs of doing business in New Jersey as well. New Jersey has some of the highest electric rates in the country. I paid 18 cents a kilowatt hour to Atlantic City Electric last month for my Somers Point home, while I only paid 16 cents for each kilowatt hour on my Florida home. That 11% difference might make much of a difference to a homeowner with a $100 a month bill. But it makes a big difference to anyone who owns a factory or a casino. And it also drives up costs for stores, hospitals, schools, and streetlights.

Why do we pay more for electricity in New Jersey? Our Board of Public Utilities (BPU) was created by “Progressives” in the 1930′s to protect consumers from gouging by utility companies. But today, it is the BPU that does most of the gouging. It closed down the Beesley’s Point plan which sold cheap power for roughly 6 cents per kilowatt hour, and is forcing Atlantic City Electric to buy power from windmill and solar panel owners for 65 cents per kwh. It also charges us extra for free electricity for
families who report low earnings, and a whole host of “Clean Energy ” and “Green Energy” and “weatherization” programs. And just last week, it ordered all electric companies to continue serving customers who didn’t pay their bills-even after the “winter emergency” rules expired.

But this is only the beginning. Last month, Chris Christie
Republicans and Steve Sweeney Democrats rammed through special legislation that will force every electric company in the state to buy billions of dollars’ worth of power from new gas and oil plants to be built by political insiders for 23.5 cents per kilowatt hour for the next 15 years-more than three times the going rate, and 20% higher than what we are now paying to get electricity delivered to our homes!

Think of how that will jack up your electric bill. And think of when the electric company is forced to buy power from the ocean windmills at more than $2 per kilowatt hour!

Another extra expense for business in New Jersey is Unemployment Insurance. In the past, employers had to contribute roughly 4% of wages up to a maximum of roughly $1,000 for each employee in addition to the 1% or $266 paid by the worker. But because the state paid out $2 billion more in benefits than it collected, it will now charge every employer $300 extra per employee. Who in their right mind would hire people in New Jersey with that hanging over your head?

This is the price for those programs to stimulate the economy and create jobs. If you think it’s worth it, go to Cumberland County.

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