New Jersey businesses left waiting for tax credits
Another front has emerged in the battle over New Jersey’s business tax breaks: The main portion of the tax credits for 2018 still haven’t yet been paid out by the Economic Development Authority. Businesses and lawmakers say that will further chill the state’s economic environment.
A special Senate committee organized as a counterweight to the gubernatorial task force scrutinizing New Jersey’s business tax incentives held its first meeting Monday. Among the many lines of criticism lodged at the Murphy administration was that businesses are waiting too long for their tax credits.
Tim Sullivan, the EDA’s chief executive officer, said the GrowNJ credits are delayed as the state uses stepped-up procedures to confirm businesses are meeting job growth promises, after a January audit by the state comptroller outlined extensive shortcomings in the state’s oversight.
“There hasn’t been a revocation or a declination of those tax credits. They just haven’t been issued yet this year as we go through the process to make sure we’re doing our homework and are in the position to say with certainty that the companies did what they say they were going to do,” Sullivan said. “And if the assertion is we’re being too thorough, I’ll cop to that.”
Sen. Bob Smith, chairman of the Senate Select Committee on Economic Growth Strategies, said thorough is good but that businesses have been put in a conundrum – waiting on tax credits, perhaps running into cash-flow problem, that they had told creditors such as banks they’d be receiving.
“Those companies that are trying to legitimately do business in New Jersey may be stymied by the fact that they can’t receive their awards in a timely manner,” Smith said.
Multiple senators pressed Sullivan for answers on the delayed tax credits. Business groups blasted the wait in more direct terms.
“I think it’s very safe to say that the open for business sign for New Jersey is hanging by a thread, if it hasn’t already fallen,” said Tom Bracken, president and chief executive officer of the New Jersey Chamber of Commerce.
Around $6.8 billion in tax incentives could be paid out through the GrowNJ and ERG programs that were established in 2013, as the $8.6 billion in awards has been reduced by $1.8 billion in withdrawn applications. Only $400 million has been issued to date, though Sullivan said that’s expected to reach $1 billion or more each of the next few years.
It has now been a month since New Jersey’s main business location tax incentives expired. The Legislature passed a bill that would extend them through Jan. 31, to have something in place while negotiations on a new incentives plan took place, but Gov. Phil Murphy has said he will veto it.
Two former senators who’ve helped write all the main business tax incentives New Jersey has had were the leadoff witnesses at Monday’s hearing.
Former Sen. Joe Kyrillos, a Republican from Monmouth County, said the tax incentives aren’t handouts. They’re credits against future tax revenues the state otherwise couldn’t count on, not cash being shelled out up front, he said.
“And while there’s always room for improvement or increased oversight, the rhetoric surrounding this issue is overblown. It’s become a disservice to the people of our state,” Kyrillos said.
Former Sen. Ray Lesniak, a Democrat from Union County, said suspending New Jersey’s tax incentives is an invitation to discourage business investment in the state.
“And to encourage poaching by other states of our existing jobs,” Lesniak said.
Smith said the special committee will hold between three and five meetings, then make recommendations on future economic development legislation.