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editorial

Vertex’s return of tax breaks sets a pattern for other firms

As Vertex Pharmaceuticals prepares to move its headquarters from Cambridge to the South Boston waterfront, it had some bad news to announce. Because sales are down for its lead drug — a hepatitis C pill called Incivek — it’s cutting about 17 percent of its total workforce. That means the loss of 375 jobs, including 175 in Massachusetts.

The good news is that Vertex will return $4.4 million in state tax incentives it received for promising to create jobs. To its credit, the company is doing so on its own accord, without waiting for the state to enforce a “clawback” provision that would require Vertex to give back the money.

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Jobs for tax breaks — that’s the grand bargain that state and city officials have been willing to strike as part of a coordinated effort to entice businesses to locate in Massachusetts and expand. In today’s global economy, this creates competition between countries, states, and even municipalities. When Vertex decided to move from Cambridge to Boston, it qualified for up to $72 million in state and local subsidies. In exchange, it promised to create 500 net new jobs through 2015.

But these deals always carry risk. Evergreen Solar, which made panels for solar power generation, qualified for $58 million in subsidies and tax breaks when it opened in Marlborough. It ended up filing for bankruptcy and shifting production to China. In Hudson, Intel Corp. benefited from some $82 million in tax breaks since 1999, in exchange for a commitment to employ 2,000 workers. But Intel has cut more than 600 jobs from its Hudson payroll and in September announced plans to eliminate another 700 positions when it shuts its only Massachusettts factory next year. In Boston, Liberty Mutual received $46.5 million in state and local tax incentives in exchange for building a $300 million Back Bay office tower, and then announced it was reducing employee benefits.

If state and local officials insist on using tax breaks and other subsidies as a lure, they should at least make it clear that companies have to give back the money if they renege on their side of the agreement. The state should do all it can to make clawback agreements enforceable, but companies should also follow Vertex’s lead in acknowledging a moral commitment not to fight them in court.

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