Less than a week after a massive corporate tax break program was introduced in the Democratic-controlled New Jersey Legislature, lawmakers voted Monday to pass the bill, sending it to Democratic Gov. Phil Murphy, who is expected to sign it.
The roughly $15 billion proposal overhauls the state’s economic development programs, largely aimed at encouraging companies to do business or start new projects and ventures in New Jersey by giving them a break on their state tax bills. It comes nearly 18 months after the state’s existing tax incentive programs expired, and as the pandemic continues to inflict damage on the economy.
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State Sen. Paul Sarlo (D., Bergen), a prime sponsor of the Economic Recovery Act of 2020, likened the bill to an omnibus package, incorporating concepts that had support on both sides of the aisle.
“This is a bill that we are going to need in order to survive, in order to stimulate our economy,” Sarlo said.
Dozens of business groups, labor unions, mayors, and others in the private and public sector voiced support for the legislation during its speedy path through Trenton.
But the pace the bill moved, allowing little time for the public to examine provisions that could cost the state billions in uncollected taxes, came under fierce attack from some of Murphy’s usual allies, including left-leaning public policy experts, progressive political groups, and environmental organizations.
Some lawmakers openly acknowledged that they had not even seen more than 100 pages of amendments to the 200-page bill during a committee hearing on Friday.
While the Murphy administration has pointed to new limits, or caps, on tax credit awards embedded in the bill, the overall size of the proposal took some observers aback.
The approved legislation would enable the state to authorize $11.5 billion in tax credit awards over seven years, and it would allow $2.6 billion in film industry tax credits over 13 years, Senate Democrats said.
“Over the next several years, New Jersey will be forgoing billions more in revenue,” said Brandon McKoy, president of the think tank New Jersey Policy Perspective, “while grappling with increased need for education and transit investments, paying back billions in borrowed funds, and maintaining vital services and support for workers, families, and small businesses.”
Murphy acknowledged the scale of the new proposal on Monday. Components of the bill have long been public, he said, “other than probably the size — and by the way, this just in, we’re in a pandemic and we need more help as opposed to less.”
“Everything in this bill was signaled as much as two-plus years ago,” Murphy said during a news conference Monday, adding: “This is one of these bills, the closer you look, the more you like it.”
The governor highlighted the inclusion of an inspector general for the new programs, as well as incentives for Main Street businesses, underserved communities, brownfield redevelopment, and venture capital investment in start-ups.
“We have gone from a corporate giveaway plan to an economic development plan,” Murphy said. “That’s what this bill is about.”
Criticism of the fast-paced process was fueled by the findings of a special task force that investigated New Jersey’s last overhaul of corporate tax credits, the 2013 Economic Opportunity Act.
The task force, appointed by Murphy in early 2019, identified sections of the law written by a law firm that later represented companies applying for tax credits. Investigators also uncovered alleged deception and misstatements by companies in their applications, as well as problems with oversight at the Economic Development Authority (EDA), which administers the programs.
The tax credit programs expired in July 2019, as the investigators continued their probe, and Murphy would not agree to a temporary extension put forward by legislators.
The lapse in time was but one visible sign of tensions between Murphy and Democratic lawmakers during the investigation. Democratic power broker George E. Norcross III, whose insurance brokerage and business partners won a $245 million tax credit award, sued Murphy over the creation of the task force. A Superior Court judge dismissed the suit, and it failed on appeal.
Members of the task force issued their third and final report in July. Investigators recommended that the EDA suspend, terminate, or review $578 million worth of tax credit awards the agency had approved.
Then, on the evening of Dec. 15, Murphy’s office and leaders in the Statehouse suddenly announced they’d reached a deal. From there, the proposal moved quickly, and in just days, grew by more than $2 billion.
A number of legislators in the Assembly and in the Senate continued to voice reservations about the rush to a vote, along with the relatively small amount of Main Street help — $50 million worth of assistance — for small businesses.
“Voting on this bill doesn’t mean that there isn’t work to be done on all other fronts, and a lot of you expressed that today,” said State Sen. M. Teresa Ruiz (D., Essex), another prime sponsor. “We must continue to offer relief for people and small businesses, make a great investment in education, ensure residents are receiving their unemployment benefits, provide the most equitable health opportunities for everyone, and prepare New Jersey for the next economic frontier.”