New Jersey is granting Panasonic a $102.4 million taxcredit to move its North American headquarters—nine miles. Theincentives, announced on Apr. 20, will help defray the cost ofleasing a new high-rise office tower to be built in Newark toreplace Panasonic's digs in Secaucus, which the Japaneseelectronics maker has outgrown.

The company concedes that its decision to stay in New Jersey,where it employs 800 workers, was swayed by the tax break. PeterFannon, vice-president of technology policy at Panasonic NorthAmerica, says the company fielded “quite competitive” offers fromAtlanta, San Diego, Los Angeles, and Brooklyn, N.Y., among others.Says Fannon: “We would not be in New Jersey without [thisprogram].” Officials in the town of Secaucus don't see it as a winfor their state, though. “We shouldn't be using tax dollars to playone municipality off of another,” says town administrator DavidDrumeler.

State and local governments eager to recover some of the morethan 8 million jobs lost during the recession are giving away$70 billion in annual subsidies to companies, according tocalculations by Kenneth Thomas, a political scientist at theUniversity of Missouri-St. Louis. States have long relied on fiscalincentives to lure businesses, or keep existing employers fromdecamping to other locales. Such largesse is coming under renewedscrutiny during this time of strapped budgets. State deficits couldreach a combined $112 billion in the fiscal year startingJuly 1. “The tragic irony of it is that in order to pay forthese things, they're cutting other areas that really are thebuilding blocks of jobs and economic growth,” says Jon Shure,director of state fiscal strategies for the Washington-based Centeron Budget and Policy Priorities.