NJ Spotlight

Liberal Groups Call for Reform of State Tax Incentives Now, Not Later

With lawmakers still evaluating New Jersey's controversial business incentive programs and at odds with Gov. Phil Murphy over his desire for a major overhaul, liberal activists are impatient for progress

NJ Spotlight — September 19, 2019

By John Reitmeyer

A major rewrite of controversial state tax-incentive programs is still pending from lawmakers, but several liberal groups say there's no need to wait any longer before enacting reforms they consider to be no-brainers.

In fact, many of the policy recommendations highlighted during a news conference in Trenton yesterday echoed testimony that a panel of national experts gave to lawmakers earlier this month, including calls for more oversight and controls on the size of tax incentives. The news conference was organized by New Jersey Working Families, New Jersey Policy Perspective and several other liberal groups.

"I think we can do this," Sue Altman, state director of New Jersey Working Families, said at the news conference. "I think we have the moral high ground."

"Come on New Jersey, let's set an example," said Brandon Castro, campaign organizer with the New Jersey Environment Council.

It remains to be seen whether any of the reform proposals will make it into a final draft of legislation that's expected later this year from Democrats, who control the Legislature.

A special select committee of lawmakers tasked with evaluating the effectiveness of tax-incentive programs that expired earlier this summer is still reviewing those programs. The committee is expected to release a report later this year, as a well as a final bill.

'Well past time' for legislative action

During yesterday's news conference, Dena Mottola Jaborska, associate director of New Jersey Citizen Action, said it's already "well past time for the Legislature to take action."

"We think they should be very eager to show that they're standing up for the reforms that are needed and for protecting the taxpayers' funding," she said.

While tax-incentive programs have long been a subject of debate in New Jersey, the issue came to a head earlier this year after the Office of the State Comptroller issued an audit that raised serious questions about whether companies have been able to profit without living up to job-creation or investment standards set in state law. Among other findings, the audit questioned the documentation submitted by companies for nearly 3,000 jobs that were reported to have been created or retained in exchange for tax breaks going back over a decade.

In the wake of the audit's release, Gov. Phil Murphy, a first-term Democrat who has loudly criticized incentive programs he inherited from former Republican Gov. Chris Christie, convened a task force to investigate whether any wrongdoing had occurred. That panel has issued at least one criminal referral.

Meanwhile, Murphy has also proposed a series of policy reforms, including targeting tax incentives toward specific goals like brownfields redevelopment and historic preservation. He is also seeking to cap the amount of revenue that can be allotted to the incentives each year to cushion their impact on the state budget, which by some estimates could already be as much as $11 billion.

Lawmakers have yet to take any action on Murphy's proposals, and he has refused to go along with their calls to reinstate programs enacted when Christie was governor until the select committee finishes its ongoing review. That has resulted in the state no longer being able to accept any new applications from companies seeking tax breaks.

There are no signs of the stalemate breaking. Lawmakers haven't moved to override Murphy's recent conditional veto of the extension bill, and they also don't seem anxious to post the governor's reform proposals for a vote any time soon.

Other states follow different practices

During the select committee's hearing earlier this month, several leading tax-incentive experts highlighted best practices that other states have been following, including using caps and regularly monitoring tax-incentive programs to ensure they are meeting specific policy goals.

A report issued yesterday by New Jersey Policy Perspective (NJPP), a liberal, Trenton-based think tank, went a step further by calling for 10 specific reforms to be enacted. They include writing into the incentive legislation requirements that companies hire locally and pay fair wages. Companies should also be disqualified from receiving an incentive if they send corporate profits offshore, according to the report.

"Now is the time for meaningful and evidence-based reforms," said NJPP senior policy analyst Sheila Reynertson, who authored the report.

The select committee is scheduled to hold its next meeting on Monday. Among the witnesses expected to testify are those that will discuss the impact that tax incentives have had on the city of Camden, one of the nation's poorest cities.

But if the stalemate drags on, state officials will not be able to compete with other states like neighboring New York and Pennsylvania that continue to offer companies incentives to relocate to or remain within their borders. And while there's been some recent talk of establishing formal agreements between states that call for a moratorium on poaching companies from regional neighbors using lucrative tax incentives, no concrete proposals have emerged. That makes tax-incentive reform "a top priority," Altman said.

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