New Jersey enticing businesses with revamped tax credit program
The tax break wars are heating up again, as New Jersey aggressively pushes a revamped program to encourage businesses to stay or move within its borders.
The retooled tax credit is called Grow New Jersey, a consolidation and expansion of several previous programs. Some companies, even those already in the state, might be eligible for as much as $300 million in tax credits per project.
The state’s neighbors, particularly New York and Pennsylvania, are not taking the competition lightly, their officials say, particularly at a delicate time when certain regions are still struggling to climb out of the recession.
So while New York City recently saw a major tax credit program expire that could put it at a disadvantage, Gov. Andrew M. Cuomo has been promising that he wants to push a new set of incentives for businesses — especially in beleaguered upstate New York — to try to stave off business flight.
Pennsylvania has been successful at wooing e-commerce companies and their enormous distribution centers to the state, although it too could face tougher challenges given how high the stakes are for economic investment.
“States are facing a Darwinian struggle for jobs, and New Jersey is using these incentives aggressively, and they are using them frequently,” said Joseph J. Seneca, a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
The New Jersey tax program allows any company to apply for the 10-year credits, regardless of its size or type, as long as it is considering leaving the state or moving there. The amount of the credit depends on location, the size of its workforce, wages and other criteria. For example, a company relocating from another state that would move to a depressed urban area and would hire hundreds of people could earn as much as $300 million in credits.
For years and years, tax breaks for major companies have been heavily criticized as corporate welfare by government reform groups, which argue that extremely well-off businesses are rarely penalized with a loss of credits if they fail to produce jobs. And fiscal conservatives often warn that the loss of millions of dollars in tax revenue year over year hampers a state from shoring up funds for the next possible downturn.
But the lure of bigger and broader protections keeps companies jockeying for the incentives. And the states have tried to work in provisions to keep the companies in check. In the case of Grow New Jersey, for example, recipients must certify they have created or maintained the specified number of jobs, and if they fail to meet the requirements, the state could withhold the credits or even require the companies to reimburse them.