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Economists from UCI and the New York Federal Reserve are teaming up to study whether a key California tax credit for businesses boosts job creation
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purring business development – particularly through job creation - in economically depressed areas improves community conditions, the theory goes. But UCI economist David Neumark has found that’s not always the case. In 2009, he conducted a highly critical study of California’s Enterprise Zone Program, finding the costly program largely ineffective at creating new businesses and jobs. The state listened, citing Neumark’s report – among others – in the program’s 2013 rescission. In its place, then-governor Jerry Brown launched the California Competes Tax Credit. The program boasts a large discretionary component that awards credits where they will have the largest impact, and the ability to recapture tax credits if hiring goals aren’t met. Five years into the program, Neumark – a newly elected fellow of the American Association for the Advancement of Science
– and economists Matthew Freedman, UCI, and Benjamin Hyman, New York Federal Reserve Bank of New York, are evaluating the effectiveness of the new program at creating jobs. Their work is supported by a $144,658 grant from the Smith Richardson Foundation. “The CCTC represents a new generation of geographically targeted, place-based policies aimed at improving local economic conditions,” says Neumark who also co-directs UCI’s Center for Population, Inequality, and Policy. “The innovative discretionary component and ability to recapture tax credits if benchmarks aren’t met make the CCTC program one of the more promising policies out there.” Since its launch in 2013, the CCTC has awarded approximately $150 million a year in tax credits to businesses in four different categories: growth projects for firms already in-state; out-of-state applicants looking to
