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New Jersey Activists Blast Christie-Era Corporate Tax Breaks

Angry about high taxes in New Jersey? Maybe it's time wealthy corporations stop getting the breaks YOU deserve, these activists say.

Patch — March 28, 2019

By Eric Kiefer, Patch Staff

An ongoing financial fiasco involving more than a decade of massive tax breaks for wealthy corporations in New Jersey is now being linked to the administration of former governor Chris Christie.

For years, watchdog groups have warned that the Christie-era New Jersey Economic Development Authority (NJEDA) was a "runaway train." But that engine of destruction — which allegedly handed out $8 billion in corporate tax breaks during Christie's tenure under dubious circumstances - can be derailed when a state incentive program expires this year, a coalition of activists says.

On Thursday, a special state task force convened for a hearing in Trenton to discuss more than $11 billion in corporate tax subsidies given out by the NJEDA over the past 14 years, the bulk of which took place before Gov. Phil Murphy took office.

A coalition of activists - who counted both progressives and conservatives among their ranks — also showed up in Trenton. They brought a key piece of political ammunition with them: a scathing report from the Office of the State Comptroller.

That audit — released in January — claimed that it may be almost impossible to tell if the economic gambit of handing out massive tax breaks to corporations has actually produced the types of jobs that politicians promised.

While it's a serious smoking gun, the comptroller report is only the tip of the iceberg when it comes to the allegations swirling around the NJEDA's massive tax breaks, activists claimed.

According to a recent WYNC report, the Christie-era NJEDA allegedly put pressure on staff to approve billions in tax credits, manipulated the cost-benefit analysis mandated by tax incentive programs and turned a blind eye to fraudulent applications.

John J. Rosenfeld, former director of incentives at the state Economic Development Authority, told WYNC that the pressure to churn out tax credits came mostly from the governor's Business Action Center, a statewide office led by then-Lt. Gov. Kim Guadagno, who later ran to succeed Christie and ultimately lost to Murphy in 2018.

In many cases, corporations that received NJEDA subsidies were already paying so little in state taxes that they were able to sell the tax credits to other companies for a profit, the activists claimed.

According to a recent report by Politico, a staggering 126 companies have sold NJEDA tax credits worth $204 million in 2017 alone.

'LINING THE POCKETS OF WEALTHY EXECUTIVES'

While the coalition praised efforts to investigate the tax subsidies, its members also demanded major reforms and a complete freeze on Christie-era EDA awards.

Erica Jedynak of Americans for Prosperity said that New Jersey is one of the worst states in the nation when it comes to the practice of picking winners and losers, giving special handouts to a favored few and leaving everyone else to pay the price.

"AFP is committed to uniting with anyone to do good by removing barriers to opportunity for all," Jedynak said, speaking on behalf of the libertarian/conservative political advocacy group.

"Every dollar promised to corporations is a dollar that has to be made up elsewhere, whether through tax hikes or spending cuts," said Dena Mottola Jaborska of New Jersey Citizen Action. "We need sensible limits on these programs so that they don't spiral out of control again, and New Jersey taxpayers must be assured that the companies receiving these tax breaks are holding up their end of the deal."

"Christie's administration rigged the state economy to benefit corporations," said Brandon Castro of the New Jersey Work Environment Council. "Billions of dollars were given away to line the pockets of wealthy executives and there is zero proof that this benefited our economy as a whole. What was produced was the destruction of jobs, deterioration of public infrastructure, and the pollution of our environment."

Rob Duffey of New Jersey Working Families pointed out that public policy organizations and watchdog groups have been warning for years that Chris Christie's EDA was a "runaway train."

"We support the task force's effort to identify wrongly awarded corporate tax breaks and hold the right people accountable," Duffey said. "Until that investigation is complete, we need a complete freeze on Christie-era EDA awards. Taxpayers shouldn't lose one penny more to this graft."

According to a joint statement from the coalition, there may be a way to grind the tax break machinery of the NJEDA to a halt: the Economic Opportunity Act of 2013.

The group stated:

"New Jersey's already generous tax incentive programs began to spiral out of control after Democratic legislators joined with Christie to pass the Economic Opportunity Act of 2013. Under the programs established by the EOA, the NJ EDA pledged billions to profitable and politically connected corporations like Prudential, Holtec, Honeywell, and Campbell's Soup. The bill is now coming due for those individual awards, with New Jersey set to lose $3.5 billion in revenue over the next three years."

According to the coalition, the programs established by the Economic Opportunity Act are set to expire this year. Meanwhile, Murphy has called for "significant reforms" such as putting a hard cap on per-job and annual awards at the NJEDA, creating tighter reporting requirements and targeting awards to emerging industries and homegrown businesses.

Thursday's coalition included the following groups: New Jersey Working Families, New Jersey Policy Perspective, Americans for Prosperity, New Jersey Citizen Action, the New Jersey Work Environment Council, and Make the Road New Jersey.

'KEY TOOL' FOR ECONOMY, OR 'CORRUPT CRONYISM?'

After the comptroller audit was released in January, officials and politicians on all wavelengths of the political spectrum blasted the state agency for allegedly wasting billions of taxpayer dollars.

In January, Attorney General Gurbir Grewal said he was "very concerned" about the comptroller audit, and that he planned to "figure out what exactly happened and whether any laws were broken."

"I spent a significant portion of my career rooting out financial misconduct as a federal prosecutor in Newark and Brooklyn, and I get very concerned whenever I see a state agency distributing so much money, with so little oversight, over such a long period of time," Grewal said.

Earlier this month, New Jersey Assemblyman Jay Webber — a Republican who lost his campaign against U.S. Rep. Mikie Sherrill in 2018 — also laid into the NJEDA tax breaks.

"The comptroller's audit revealed that accountability is nearly nonexistent in New Jersey corporate subsidies programs," Webber said.

Acting in response to the tax breaks, Webber sponsored a bill that would bar awarding additional subsidies to a company that has failed to make repayments for 24 months on a previously awarded subsidized loan.

"Allowing defaulting companies to take new subsidies is not 'economic development'; it's corrupt cronyism at the expense of our citizens," Webber charged.

One of the most vocal critics of the NJEDA tax breaks has been Gov. Murphy, who set the comptroller audit in motion with a Jan. 19 executive order.

"The ineffectiveness of how the state's tax incentive programs were structured and managed has now been laid bare for the eyes of New Jersey taxpayers," Murphy said in January.

However, during his tenure as governor, Murphy has also advocated in favor of Teva Pharmaceuticals USA, which the NJEDA gave a $40 million, performance-based tax break to move its U.S. headquarters from Pennsylvania to New Jersey, despite multiple lawsuits accusing it of contributing to the national opioid crisis.

Murphy also supported the idea of giving Amazon $5 billion in state tax breaks to locate its headquarters in Newark, a bid that the city ultimately lost.

However, some experts have claimed that the tax breaks are vital for the health of the Garden State business community.

Earlier this month, the New Jersey Business & Industry Association (NJBIA) said that the state's tax incentive programs are a "key tool" in its economic development strategy.

According to Andrew Musick, NJBIA vice president for government affairs, said that the Garden State's high tax rates put it at a competitive disadvantage in the region, as well as the nation. Without a robust incentive program to offset them, New Jersey would find it difficult to attract companies that provide quality employment opportunities for its residents.

"There are many great qualities that attract businesses to New Jersey, such as our highly educated workforce and accessibility to major markets, like New York City and Philadelphia," Musick said. "However, the high cost of doing business and high cost of living serve as a barrier to entry into our state. As such, tax incentives play a key role in keeping New Jersey competitive with surrounding states. "

WHO'S GOTTEN TAX BREAKS FROM THE NJEDA?

Some of the corporations that have been approved for recent tax breaks from the NJEDA include:

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