Two months after New Jersey’s controversial corporate tax break program expired, policy experts urged lawmakers on Thursday to seize the opportunity to improve how the state offers business incentives.
Among the suggestions during a state Senate hearing in Trenton: Slash the amount of money per job that New Jersey gives out, evaluate incentive programs to measure their effectiveness, and reconsider property tax abatements for businesses locating in distressed cities.
New Jersey pays businesses twice the national average to create a job: about $66,000 a job, compared with a national average of $33,000 per job, according to testimony by Timothy J. Bartik, one of the country’s leading researchers in regional economic development.
Bartik said the state should cut its per-job incentive amount in half, and invest more in skills training, small business services, and infrastructure.
“I think that if these kinds of reforms are followed, New Jersey can get a higher bang for the buck,” said Bartik, a senior economist at the nonprofit Upjohn Institute for Employment Research, in Kalamazoo, Mich.
He pointed to Virginia’s deal with Amazon to lure the company’s new headquarters. Virginia offered the e-commerce giant less than $20,000 a job, and the state is investing in transportation improvements and a new high-tech college campus, as well.
“These skill investments will encourage Amazon to do more local hiring of Virginia residents, rather than bringing in employees from out of state,” Bartik wrote in prepared remarks.
New Jersey’s tax incentive programs expired June 30 amid a feud among Democrats, and investigations into the multi-billion dollar programs, which are overseen by the state’s Economic Development Authority (EDA). There have been allegations that the tax breaks in Camden have gone to firms with political ties.
A special state Senate committee started hearings on economic incentives in July.
During Thursday’s hearing, Rutgers professor Michael Lahr said he was troubled by provisions for property tax abatements.
Under the 2013 Economic Opportunity Act, which revamped the state’s tax credit programs, companies relocating to the long-struggling city of Camden could avoid paying property taxes for up to 10 years, and then pay a reduced tax rate until the 20th year of a building project.
“In distressed areas, this seems like insanity to me,” said Lahr, director of Rutgers Economic Advisory Service. Property taxes are the “source of income” a city will get from a newly built facility, he continued. If businesses get the property tax abatement, he said, “somehow the state should step in” and give those same tax revenues back to the city.
In additional, Lahr said, the tax credit legislation allowed companies to count their property taxes as a “benefit” to the state — even if the companies wouldn’t be paying those property taxes. Lahr co-authored a review of the tax incentives last year for the EDA, calling attention to the same issue.
“It was a strange piece of math in that legislation,” Lahr told the committee.
State Sen. Bob Smith (D., Middlesex), the committee’s chair, said he was encouraged by suggestions in the testimony — including adjusting the cost-benefit ratio for awards, placing a “flexible cap" on the amount the state spends on awards, and improving transparency in the programs.