As the sponsor of New Jersey’s first tax incentive that transformed a contaminated garbage dump in Elizabeth into the Jersey Gardens Mall, which has generated thousands of jobs and millions of dollars of revenue for Elizabeth and the state treasury and has more visitors from out of state than any other location in New Jersey, I don’t want to bury tax incentives, but to praise them.
Tax incentives are necessary for New Jersey to attract business investment and to create and retain jobs in our state, which has shown up in studies as one of the worst when it comes to business climate. Without tax incentives, the former Revel casino would still be a white elephant casting a blight on Atlantic City, but instead, building trades workers were put to work completing the building and hundreds of workers who would otherwise have been unemployed got jobs. All thanks to tax incentives that did not cost taxpayers one dime.
Without tax incentives, Panasonic’s America’s Headquarters would not be in Newark, but would be in Atlanta, Georgia. Without tax incentives, Teachers Village in Newark would still be a five block collection of old rundown buildings that tax incentives transformed into moderately priced apartments that have stimulated other new construction in the neighborhood with new restaurants, shops, and cultural amenities for Newark’s residents, all thanks to the ERG tax incentive legislation I sponsored.
There are hundreds of other examples of the benefits flowing from New Jersey’s tax incentive programs, none of which have been discussed by Gov. Phil Murphy’s EDA Task Force, at least not publicly, although it has made very public statements about a handful of tax incentives awarded by the EDA.
Let me set the record straight from the start. Governor Murphy was flat out wrong when he stated in his State of the State message that our tax incentives have “squandered” $11 billion. On the contrary, tax incentives increase revenue to the state treasury. If a company does not locate in the state or leaves the state because it has a lower cost of doing business elsewhere, we lose 100 percent of its taxes. A tax incentive that brings in or keeps jobs from leaving our state generates 80 percent of those taxes. Eighty percent of X is more than 100 percent of zero. The $11 billion of tax incentives Governor Murphy said has been squandered will instead produce $13.75 billion more for the state treasury than if there were no tax incentives.
Tax incentives have come under intense criticism, some fair, some unfair, some based on a thoughtful analysis of the program, some based on politics. Making the tax incentives debate political is fraught with danger to the economic health of our state. New York lost 50,000 Amazon jobs to Virginia because of a political attack on tax incentives.
As with all government programs, tax incentives should be periodically reviewed to determine their effectiveness. I recognized that when I sponsored the Economic Opportunity Act under which the Bloustein School of Planning and Public Policy at Rutgers University made recommendations. I support those recommendations and those announced by Senator Troy Singleton.
I also support enhanced tax incentives for the poorest municipalities, which have lagged behind in economic development and job creation. That’s why I agreed to amendments to the Economic Opportunity Act that enhanced incentives for businesses to locate in the four cities that have the lowest median family income: Camden, Trenton, Passaic, Paterson and in Atlantic City, which had the highest unemployment rate in the state.
My advice on tax incentives is to mend them, don’t end them. I also call for adding a missing element to our tax incentives: Affordable Housing. A current bill (A2596/S1482) would create a more comprehensive urban development strategy designed to transform the state’s urban centers from areas with just offices, to 24-hour a day, seven-day per week communities with robust residential populations.
It also has been endorsed by The Housing & Community Development Network of New Jersey, which said, “Addressing the need for people at every income level to access affordable homes through mixed-income developments would be an economic boon for our state. This approach can help our economy and our future by creating jobs, thriving neighborhoods and giving opportunities for our State’s lower income residents.”
Tax incentives have created and retained thousands of permanent jobs, thousands of building trades jobs, generated billions of dollars of private investment and added billions of dollars to the state treasury. Let’s mend them, not end them.
Raymond (“Ray”) Lesniak served in the State Senate from 1983 to 2018 and in the General Assembly from 1978 to 1983.