This year alone, the Christie administration has awarded businesses more than $1 billion in tax breaks or grants to set up shop in New Jersey, to relocate or expand. The latest is $188 million to JPMorgan Chase to come to Jersey City. Critics say the state’s not getting the return it should on the incentives. Among them, Gordon MacInnes, the president of New Jersey Policy Perspective spoke with NJTV News Correspondent Michael Hill about how the tax incentives may not be as beneficial as they appear.
MacInnes says that New Jersey isn’t getting the return it should on these dollars because the formula that the Legislature set up greatly benefits applicant businesses at the expense of taxpayers.
“The benefits are measured over a long period of time, but the businesses are only required to stay a much shorter period of time. So, the fact is that we can’t guarantee all of those benefits are going to be realized by the taxpayers, and we expect to see because of the number and the magnitude of these tax breaks, we expect to see those contracts broken often enough that it’s going to end up penalizing taxpayers,” he said.
The Economic Development Authority says that in JPMorgan Chase’s case it was planning to moving to the Midwest or Ohio, but because of the incentives, the jobs are being drawing to New Jersey. He says that there are bigger, more motivating factors than the tax incentives when it comes to persuading companies to come to New Jersey.
“[The incentives are] set up to encourage businesses to produce a letter that says, ‘Oh look we have this from Ohio and if you don’t grant us something similar or bigger, we’re going to move to Ohio.’ We don’t know in fact if that’s what motivates business. But we do know over time that what counts is location, convenience, the quality of your workforce, the availability of good education. Those are the things that attract the jobs that we want in New Jersey,” MacInnes said. “The tax benefits are a small part of the business’ total operation and the proof seems to be that they have very little to do with making decision on location.”
Proponents say that JPMorgan Chase moving to Jersey City would create about 2,000 jobs and that improves the state’s economy. MacInnes agrees, but says that for more than a decade, financial services companies — particularity back office, IT and those sorts of jobs on the Jersey City waterfront have been filling up due to cheaper rents and a close proximity to Wall Street.
“The mayor of Jersey City [Steven Fulop] has recently said that they’re no longer going to get the full PILOT, the payment in lieu of tax break, that the city can give. They’re going to get 50 percent of it because the demand for that space is so strong, but it’s been going on for a long time. It leads you to a suspicion that JPMorgan Chase was coming across anyway,” he said.
MacInnes brings up questions about New Jersey getting the return on the dollar and finding out the full value of what these jobs are producing, like how many jobs are actually coming or whether they’re going some place else.
“Eight years ago, the Legislature mandated that the administration provide an annual report of the jobs produced, what they’re being paid, what are the benefits, are they unionized, how many are part-time, how many are full-time. All of that information which would allow me to answer that question. In fact no report has been produced eight years later. There have been legislators pushing for this. We need to get regular, accurate information from the administration on the value of these subsidies and how many people are actually being employed who otherwise would not have been. We can’t answer that question because there’s just a blank wall when it comes to gathering that information,” he said.
There has been a legislative push to get those reports, but MacInnes said, “There is a strong consensus I think in the Legislature that those reports are long overdue.”