Christie considers bill to increase reporting on business tax breaks
New Jersey’s pension and transportation funding woes may be the two largest issues confronting state lawmakers this year, but the lucrative tax incentives the state awards businesses to relocate or remain in the Garden State are drawing significant attention, with some lawmakers pushing to enact legislation to better measure the incentives’ effectiveness.
New Jersey has awarded more than $5 billion in tax incentives since Gov. Chris Christie first took office in 2010, including more than $2 billion since 2014.
Supporters say the tax incentives come with strict conditions and are crucial to luring private sector employers to a high-cost state like New Jersey. They also argue the jobs created or retained from the projects eventually result in higher income and sales tax revenues than what is lost in corporate business tax revenues.
Opponents question the effectiveness of the tax breaks in creating jobs, and say they take money away from improving public education and infrastructure that would attract business.
In the midst of the debate over the incentives is a bill on Christie’s desk. It seeks stricter criteria and reporting requirements about awarded tax incentives.
Written by Assemblyman Troy Singleton, D-7th of Palmyra, the bill would update a 2007 law that required the administration to submit an annual report with the proposed state budget detailing all tax incentives received by New Jersey companies and their impact on job creation and job losses.
Citing federal privacy restrictions, the Christie administration has never issued the report.
Singleton’s bill seeks to address that issue by requiring the report to detail goals and purposes for each incentive — without releasing what might be considered trade secrets. The bill also would require new incentives to expire after 10 years.
Singleton said the bill’s intent is to create a reporting criteria to help measure whether such incentives are effective.
“The state does not authorize these tax expenditures lightly,” Singleton said last month after the full Assembly approved the measure. “They’re authorized for specific goals, such as creating jobs or boosting economic growth, so we need to make certain these benefits are working. It’s what taxpayers desire.”
The Assembly voted 43-31 on March 26 to send the bill to Christie for consideration. The Senate passed it in October by a 23-14 vote.
Christie has 45 days to review the bill before deciding whether to sign, veto it or recommend changes for the Legislature to consider.
The effectiveness of the tax incentives has been raised during the Legislature’s ongoing review of the governor’s proposed $33.8 billion budget. The most recent mention came last week, when the nonpartisan Office of Legislative Services reported to the state Assembly and Senate budget committees that $135 million in tax credits awarded by the state Economic Development Authority would count against business tax revenues during the upcoming 2016 fiscal year.
Critics of the incentives, such as the left-leaning political group, New Jersey Working Families, lament the loss of those revenues, arguing that more jobs could be created if those dollars were invested in higher education or infrastructure. During budget hearings, the group also has called for more transparency about the incentives and an independent analysis of their impact.
New Jersey Policy Perspective, a liberal think tank, said Singleton’s bill would provide much-needed information and accountability.
“It is now up to the governor as to whether we’ll truly have greater transparency about New Jersey’s economic policy, or whether we’ll remain in the dark,” said Jon Whiten, the think tank’s deputy director.
But some opponents worry the bill would create another unintended administrative burden on businesses that already are fed up with regulations and red tape. Opponents also criticize the 10-year sunset provision, arguing it might compromise New Jersey’s ability to compete in the economic race to attract and retain private-sector employers.
“We should be looking to sunset all of the 115 tax and fee increases enacted by my colleagues on the other side of the aisle instead of looking to reduce or eliminate the tax incentives that help our economy,” Assemblyman Anthony Bucco, R-25th of Boonton, said.
“We must challenge ourselves to improve the state’s low business ranking instead of incentivizing companies to leave,” Bucco added. “There is a limit to the premium businesses are willing to pay and this legislation pushes them closer to the breaking point.”