Gov. Phil Murphy signed into law on Thursday a massive, $14 billion corporate tax-break bill that he said will help foster a stronger state economic recovery coming out of the coronavirus pandemic.
The new law’s enactment comes less than a month after the bill was introduced and put on a fast track by lawmakers following a deal reached with Murphy that resolved several longstanding economic-development policy disagreements.
The governor and several lawmakers who attended a morning bill-signing event in Hamilton, Mercer County, focused on ways they said the tax breaks established by their compromise could help generate new jobs in a state that has been ravaged by the ongoing COVID-19 health crisis.
“This is how we propel our economy moving forward to be a strong and resilient, post-COVID reality and future,” Murphy said.
The voluminous law updates economic-development tax-incentive programs that were allowed to expire more than a year ago as Murphy and fellow Democrats who control the Legislature were unable to reach an agreement to renew them.
The law also establishes several new programs to encourage things like historic preservation, brownfield remediation and the elimination of so-called food deserts in underserved communities. It also establishes tougher oversight provisions and labor protections and creates a new public-private venture-capital fund.
In all, the law would allow for up to $1.5 billion in tax breaks to be awarded annually over six years. The overall $9 billion allocation could be spread out over seven years if the total value of awarded tax breaks doesn’t hit annual program caps in the first six years, according to the law. Another up to $2.5 billion in tax breaks could also be awarded for “transformative projects” over the six to seven years.
The law also sets aside $50 million in one-time funding for small-business assistance.
Changes the law makes to existing tax-break programs, including those that provide tax credits to the film industry, pushed the total amount of authorized state spending on the tax-break programs up to $14.4 billion, according to a fiscal estimate prepared by the nonpartisan Office of Legislative Services.
No specific source of revenue has been identified to fund the tax breaks, and language in the OLS fiscal estimate raised questions about the overall net economic benefit they are supposed to provide the state over the long-term.
“The Office of Legislative Services (OLS) is unable to ascertain whether the bill will have a positive or negative fiscal net impact on the State because of imperfect information on the number and attributes of projects that will receive incentives as a result of the bill’s enactment,” the fiscal estimate said.
New Jersey’s unemployment rate has risen above 10% amid the pandemic, and later this year the governor faces reelection and all 120 legislative seats will also be on the November ballot.
Murphy said during Thursday’s bill-signing that the tax breaks would “power us forward and support, directly and indirectly, thousands of good jobs.”
The event came nearly two years after Murphy devoted much of his annual State of the State address to criticize the handling of corporate tax breaks by prior administrations and to call for the adoption of a series of reforms, including improved oversight and the implementation of spending caps.
“These is so much throughout this package that is good for our state,” Murphy said Thursday.
The new law also drew praise from business-lobbying groups that had been urging the governor and lawmakers to establish new incentive programs to help offset the state’s reputation for levying high corporate taxes.
“We believe this is a comprehensive and balanced plan that comes at a most opportune time, as we work to recover from the pandemic,” said Michele Siekerka, president and chief executive officer of the New Jersey Business & Industry Association.
Despite drawing criticism from some lawmakers and progressive groups for being moved too quickly, the tax-break bill breezed through the Legislature just before Christmas, passing 38-1 in the Senate and 68-11 in the Assembly.
Senate President Steve Sweeney faulted critics of the tax breaks during the bill-signing for calling the incentives “giveaways.”
“This is not a giveaway,” said Sweeney (D-Gloucester). “This is about investing in the state of New Jersey’s future.”
But in a statement issued after the bill-signing, Brandon McKoy, president of New Jersey Policy Perspective, a left-leaning Trenton-based think tank, called the awarding of economic-development tax breaks “a bloated economic development strategy that has failed to work.”
“The reality is, based on a growing body of research, corporate tax breaks of this scale are rarely a good deal for states,” McKoy said. “They are much more likely to shortchange the Treasury for decades to come.”