Corporate Tax

Can corporate tax incentives revive a pandemic financial system? New Jersey believes they will.

After more than a year of scandals and new revelations about the corporate incentive tax program in New Jersey, the state governor has announced a new, even bigger program to be voted on less than a week after his announcement.

New Jersey plans to extend its corporate tax subsidy program by $ 11.5 billion over a six-year period. Proponents of the program say the incentives, which are tax breaks tied to a certain number of jobs created, create new businesses and new jobs for the state. However, the program has previously been checked for cronyism and the lack of regulations that could prevent it from running away with the state budget.

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The move was quick and without warning. On December 15, New Jersey governor Phil Murphy announced a new contract to renew the state’s state tax aid programs, which expired in 2019. The proposal was released on Thursday and lawmakers are swiftly following the bill. with plans to hold hearings on the bill on Friday and pass them on Monday. Several members of the Democratic State Assembly participated in the governor’s announcement, including spokesman Craig Coughlin. Senate President Steve Sweeney also endorsed the announcement. Sweeney has long been allied with George E. Norcross III, a major Democratic donor and Camden businessman whose tax breaks came under fire under the previous program. During a recent panel discussion hosted by the New Jersey Bar Association, Sweeney expressed his preference for large subsidies, saying, “Ultimately, you know that if the cap is big enough, I can live with it.”

Murphy’s stance “was surprising and contrary to what the government said,” said Brandon McKoy, president of the New Jersey Policy Perspective (NJPP), a non-partisan think tank. “The governor advocated that New Jersey was too dependent on these subsidies.”

The new program is even bigger than the much-maligned program that was passed as Governor of Republican Chris Christie. Christie set a record for governors on mega deals, said Greg LeRoy, executive director of Good Jobs First, a government accountability organization; He approved more than $ 100 million than any other governor. While critics acknowledge that Murphy’s bill has benefits – including higher professional training requirements and tax break caps per job – the program’s total size of more than $ 11 billion over six years dwarfs all the benefits would result from stricter regulations.

Jon Whiten, former vice president of NJPP and expert on subsidies for economic development in New Jersey, said he was pleased with Murphy’s commitment to curtailing such incentive programs after seeing their explosive growth under the Christie administration. But that was it. “A year ago there seemed to be widespread agreement that these programs need to be scaled down,” Whiten wrote in a statement to the Prospect. “This new calculation doesn’t do that; In fact, it does exactly the opposite. “

Under the new proposal, the state agrees to forego $ 1.4 billion a year in revenue to pay for these subsidies, even though the state budget was previously strained by a similar program. The state has already borrowed billions of dollars to fill its budget gap and it is now clear that the federal coronavirus aid package will not include state and local aid, McKoy noted. “You want to pass this on Monday. So you just add [to the bill’s deficiencies] an irrelevant disregard for democratic norms. “

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“We saw a bogus trial like this in 2013 – and it led to an ongoing investigation and historic New Jersey political scandal,” said Sue Altman, director of the New Jersey Working Families Party. “This deal violates basic principles of good government and transparency while the state has to spend money to avoid filling corporate pockets and propping up a home industry of politically affiliated advisers and lawyers.”

“If ever there was a state that should be full [democratic] Process for a tax subsidy program, it’s New Jersey, ”LeRoy said.

McKoy added that the move also sets bad precedent for Murphy’s successor, normalizing policies that have historically crippled the state budget. Despite the fact that the Economic Development Agency may be competently run under Murphy administration, it may not be subject to future administration, clearing the way for unnecessary corporate tax breaks. Murphy’s bill includes some investments in green energy and the development of brownfield sites where buildings are built on previously developed land. However, critics say this is only a small part of a tax break program for corporate giants.

“New Jersey has truly been a model of positive progressive taxation this year, with the millionaire tax and the expansion of earned income tax credits. These are really the best ways to raise money from the people who are making money and provide help to the people in need, ”said Dylan Grundman O’Neill, senior policy analyst at the Department of Taxes and Economic Policy . “This large package of subsidies to businesses seems to really contradict that and to slow much of the progress they have made this year.”

Critics of these incentives have long argued that corporate tax incentives are not the best way to initiate development or growth.

“Good government groups and grass-roots activists have struggled for years to contain and reform New Jersey’s runaway corporate tax subsidy program,” McKoy added in a statement. “While this bill contains important oversight and independent review provisions to prevent fraud and abuse, the inflated price of $ 11.5 billion completely undermines those protections.”

LeRoy agreed. Just because the program added safeguards to make it more transparent, he added, adding claw backs for subsidies given to businesses that fail to keep their end of business by not offering professional training or by failing to meet local hiring requirements a good program – especially if the price is huge and it’s played through without proper public oversight.

“The scale is really absurd and only threatens that good protection because when you get that high you will be inviting more applications,” McKoy told the Prospect.

Last year, proponents hoped that a Kansas-Missouri deal to reduce “wasteful” corporate tax incentive programs, in which a state competed against its neighbors, would fundamentally change New Jersey. At the time, Murphy was expressing openness to a similar “truce” with neighbors and competitors from New Jersey, Pennsylvania, and New York. Critics of these incentives have long argued that corporate tax incentives are not the best way to initiate development or growth. Businesses first look to government facilities like public transportation and investments in public education before considering tax incentives as reasons to move.

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“[Corporate tax incentives are] A really discredited part of economic policy, ”LeRoy said. “That is exactly what states shouldn’t do now.” He pointed out that the argument that such policies act as an economic incentive during a recession is wrong. “In a recession, the use of incentives is not countercyclical. The incentives are structured so that businesses earn them through investing and hiring, however [companies] don’t do this in a recession. It is during a period of recovery or growth that they stop. “

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