Unlikely Partners Say $7B Amazon Sweetener Not Worth it to NJ

Improbable alliance working to turn legislators against massive tax-incentive deal that governor, other politicians hope will draw online giant’s second corporate headquarters to Newark

L to R: Jon Whiten of New Jersey Policy Perspective; Erica Jedynak of Americans For Prosperity-New Jersey; Thurston Powers, of the American Legislative Exchange Council; and Assemblyman John Wisniewski (D-Middlesex)
New Jersey’s push to land Amazon’s new corporate headquarters with a package of lucrative tax incentives is galvanizing opposition among an unlikely partnership of advocacy groups that don’t normally see eye-to-eye on matters related to state tax policy.

Representatives of New Jersey Policy Perspective, a liberal think tank, stood yesterday alongside officials from Americans For Prosperity-New Jersey and the American Legislative Exchange Council — two groups that espouse free-market principles and have been linked to conservative billionaires Charles and David Koch — to voice concerns about the proposed Amazon tax incentives, which could be worth as much as [link:https://www.njspotlight.com/stories/17/10/16/state-city-offer-7b-tax-incentives-in-bid-to-lure-amazon-hq2-to-newark/|$7 billion.

While their political ideologies remain far different, the groups’ respective leaders said they’ve had no problem finding common ground on the notion that offering up huge tax incentives to a wealthy corporation like Amazon is not in the best interest of the state and its economic future.

“We are 100 percent on the same page that this is the wrong decision for New Jersey,” said Erica Jedynak, AFP’s state director in New Jersey, during a news conference in the State House.

“It rigs the system,” said Jon Whiten, NJPP’s vice president. “It enriches those who are already doing quite well.”

Bad policy?

With the first votes on the state portion of the Amazon tax-incentive deal expected to take place as early as next month when legislative leaders convene the latest lame-duck session, the groups’ leaders say they will now be working to make sure lawmakers on both sides of the aisle understand why they believe the incentives would represent bad policy. But the groups’ leaders have their work cut out for them since the incentives already have firm bipartisan backing among legislative leaders and others who believe the Amazon headquarters could produce a net-tax windfall for the state and have a transformative impact on the rebounding city of Newark, which is where the state is hoping Amazon ultimately lands.

The issue has also split the respective candidates in this year’s New Jersey gubernatorial election, but it may not matter in the end since Gov. Chris Christie is promising to enact an incentive deal before he leaves office in early January.

Founded in 1994, Amazon was set up as an online bookseller. Since then it has become one of the world’s largest companies, maybe its largest retailer, with more than 380,000 employees. Its current corporate headquarters is in Seattle, where the company started, covering eight million square feet. And Amazon estimates the Seattle campus generates as much as $1.4 billion annually in direct and indirect economic activity for the city.

The company announced a nationwide search for its second corporate headquarters early last month, setting off a sweepstakes among cities, states, and even places in Canada and Mexico.

Christie, Booker, Baraka all for the deal

The public nature of Amazon’s HQ2 search has effectively pitted places that are interested in hosting the new headquarters directly against each other, a process that’s expected to drive up the value of tax credits and other incentives that will be offered to close the deal. Final proposals were due from locations interested in hosting the new corporate facility last week, and Amazon officials said yesterday that the company has received a total of 238 bids.

Last week, Christie, a Republican, joined with U.S. Sen. Cory Booker (D-NJ) and Newark Mayor Ras Baraka to announce that the state was endorsing the proposal that Newark was submitting to Amazon. The decision followed a prior announcement from legislative leaders in both parties that made clear they are willing to overhaul the state’s existing economic-development tax-incentive programs to ensure that Amazon could qualify for up to $5 billion in tax incentives in exchange for the up to 50,000 new jobs and $5 billion in investment that the Amazon headquarters is expected to generate.

Baraka, a Democrat, said city officials are also prepared to offer Amazon as much as $2 billion in local tax breaks, including property tax abatements and a waiver of the city’s payroll tax. That would push the value of the incentive deal to $7 billion, an amount that’s believed to be the richest of any offered to Amazon before last week’s deadline.

The framework of New Jersey’s economic-development tax incentives requires businesses to meet certain criteria, involving such things as hiring and investment goals, in order to realize the tax breaks. That ensures companies don’t simply receive a blank check from the state. Projects must also result in an overall net benefit for the state and its taxpayers as companies bring in new employees who contribute to the overall economy, including paying income taxes to the state.

Baraka: ‘Game changer’ for Newark

Christie has argued an Amazon headquarters located in New Jersey could provide up to $9 billion in overall economic benefit for the state, making the incentives an overall good deal. And as Newark continues to move ahead with a rebirth effort linked heavily to technology, Baraka said Amazon would be a “game changer” for his city, and the region.

On the campaign trail this year, Republican Kim Guadagno, Christie’s longtime lieutenant governor, is fully supporting the use of tax incentives in the push to lure Amazon, while Democrat Phil Murphy, a former Goldman Sachs executive, has urged some caution and a more thoughtful approach to the Amazon effort. But even though polls show Murphy is comfortably ahead of Guadagno, Christie has made it clear that the incentive package is likely to already be written into state economic-development law by the time the next governor is sworn into office. (Christie could not run for re-election himself due to the state constitution’s term limits.)

That means opponents of the incentives have only one path to victory — which is working feverishly between now and the upcoming lame-duck session to convince lawmakers on both sides of the aisle that offering up lucrative incentives to Amazon is something their respective bases do not support.

Whiten argued yesterday that the incentives do not represent progressive values since revenues that would be left uncollected were Amazon to locate here would therefore not be available to fund investments in areas like public transportation and higher education that help to sustain the state’s economy. Whiten also said that during Christie’s two terms the tax incentives have been overused, with New Jersey now holding the record of providing corporations with more nine-figure subsidies than any other state.

Wisniewski: ‘Pledging money we do not have’

“This Amazon deal is not out-of-the-blue,” Whiten said.

Assemblyman Jon Wisniewski (D-Middlesex) also spoke during the news conference, suggesting it makes no sense to offer the tax incentives to a company like Amazon, which takes in nearly the same amount of revenue in just one quarter that New Jersey collects in a full year.

“We’re pledging money that we do not have,” Wisniewski said.

Jedynak said a better approach to economic growth involves lowering taxes overall so both small businesses and big corporations like Amazon can compete on an equal footing. “So decisionmakers of New Jersey, we are urging you to oppose this, and frankly, work on what New Jersey needs, (which is) tax and labor reforms, looking to having well-planned infrastructure, and having a consistent and stable business climate,” Jedynak said.

“The fact is, tax cronyism is poison to the economy,” said Thurston Powers, a legislative analyst with ALEC.