Report questions N.J.'s $4B tax subsidy surge to state businesses

Posted: June 12, 2014

TRENTON - It may take several years to know for certain whether the $82 million in tax credits New Jersey awarded the 76ers on Tuesday to open a new practice facility in Camden will improve the city's economy.

What is clear: Those tax breaks are part of a larger surge in subsidies granted by the state to businesses since Gov. Christie took office in 2010.

A new report, to be released Wednesday, says New Jersey has awarded $4 billion in tax subsidies and credits to corporations this decade - up from $1.2 billion in the 2000s, and $160 million in the 1990s.

The report, written by the liberal-leaning think tank New Jersey Policy Perspective, argues that the subsidies are straining the budget and have not translated to economic growth: The state has only recovered 40 percent of the jobs lost during the recession, while it leads the nation in the percentage of homeowners who are in foreclosure.

Last year, the Democrat-controlled Legislature worked with Christie, a Republican, to expand the incentive program. Elected officials in South Jersey - particularly Camden - have trumpeted the law as an economic boon to the region.

The report's findings are underwhelming. The $4 billion in subsidies this decade are linked to 83,960 permanent jobs, or a cost of nearly $48,000 per job - up threefold from the 2000s.

The subsidies don't always lead to new jobs. Forty-three percent of jobs linked to subsidies are considered "at-risk" existing jobs that businesses had threatened to relocate to another state, according to the report.

And some of the largest tax breaks were granted to companies moving within the state, such as when Prudential received a $210 million tax break to stay in Newark and build a new office tower.

Even so, the state needs to offer incentives to stay competitive, said Michael A. Egenton, senior vice president for government relations at the New Jersey Chamber of Commerce.

"There is an economic-development war going on right now," he said, noting in particular New York Gov. Andrew Cuomo's efforts to lure business to his state.

Erin Gold, a spokeswoman for the state Economic Development Authority, said the agency conducts "a comprehensive net benefit analysis to ensure that projects will result in a net positive impact to New Jersey."

It requires "that projects first generate new tax revenue, complete capital investments, and/or hire or retain employees to receive the approved benefits," Gold said.

In a fiscal analysis of the 2013 law, the nonpartisan Office of Legislative Services concluded last year that resulting state and local revenue impact was "indeterminate."

Too much of a focus on tax breaks is misguided, the New Jersey Policy Perspective report says, since state and local taxes make up less than 5 percent of the cost of doing business.

"It's really the only game they've been using to try to grow the economy," Jon Whiten, deputy director of NJPP and author of the report, said of Christie and the Legislature.

He acknowledged that other states use the same tools and New Jersey can't halt its subsidy programs altogether. "But what we're really trying to advocate for is that there's a more balanced approach that also includes investing in the things that are known to grow economies," such as education, transit, and public safety, Whiten said.

His report proposes caps on the state's subsidy programs, requiring more information from companies that apply, and eliminating subsidies to retain existing jobs.



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