New Jersey will likely offer more in corporate tax incentives this year than ever before as Governor Chris Christie tries to boost job growth during his run for president.
The state’s economic woes could hinder Christie’s chances at the White House, but incentive driven job growth could be a quick fix and boost the candidate’s reputation.
New Jersey’s unemployment rate is at a seven-year low under Christie, but still exceeds the national average despite the glut of tax incentives and corporate subsidies the state has used in recent years to attract businesses.
“[Governor Christie] doesn’t have a New Jersey miracle to point to in terms of his economic turnaround,” said Seton Hall political science professor Matthew Hale. “The story that he’s trying to win with on the campaign is that he is a conservative republican in a very liberal state and he’s fighting the good fight.”
Since February 2010 – the state’s recessionary low point for private sector jobs – New Jersey has created 191,800 jobs, but still hasn’t recovered all the jobs it lost during the recession.
Many were created under Grow N.J., the major component of the state tax incentive program reforms in 2013. Since then, the New Jersey Economic Development Authority had awarded about $3.2 billion to retain and attract new jobs. The incentive driven tug-of-war for jobs is nothing new: incentives have been used in New Jersey since 1996, but the Garden State has been particularly generous under Christie.
The state awarded just $1.2 billion in incentives in the 10 years before the Christie signed off on Grow N.J., but is on pace to approve a record breaking $2.7 billion in corporate subsidies this year alone, according to New Jersey Policy Perspective, a liberal think tank.
New Jersey needed jobs after the Great Recession and there is very little a governor can actually do to create jobs outside of plying CEOs with incentives, said Ben Dworkin, director of the Rebovich Institute for New Jersey Politics.
Even with the incentives, New Jersey is still lagging behind the nation in terms of economic recovery. The state has a smaller GDP than almost any other, according to the Bureau of Economic Analysis.
The decision to change the incentives system so that such astronomical handouts are possible may have done more for the Governor’s profile than it did for New Jersey, NJPP’s deputy director, Jon Whiten, said.
“If you look at the track record of the last five years, we’re just being outperformed all over the place,” Whiten said.
Incentive programs allow governors to claim credit for investments, according to Nathan Jensen, a political economist at George Washington University. They can generate bad press for failed deals, corrupt dealing or poor management, but the political benefits of overusing incentives outweigh the costs, Jensen said.
Critics have argued that incentive packages are a massive waste of resources, but they’re potential goldmines for politicians’ reputations.
“It’s kind of a free lunch scenario,” Whiten said. “They get to say they’re doing something to create jobs and grow the economy without actually having to do any of the hard work that’s usually entailed to help grow jobs and the economy.”
Governor Christie, who has polled at just 2-3% among likely Republican voters, will presumably drop out of the presidential race soon unless he sees a surge of voter support. His incentive policy on his return is unclear, said political pundit Matthew Hale. The Governor may decide he needs to look like someone who can work with Democrats, in which case he might back off on the incentives.
“The other option is that he comes back and he stays exactly the far right-wing person that he’s become on the presidential trail and absolutely nothing gets done and he gives more and more incentives,” Hale said.
New Jersey Incentive Types:
1. Grow NJ – Grow NJ is the major incentive program since the enactment of New Jersey’s Economic Opportunity Act of 2013. It brought several other incentives, listed below, under one umbrella. It was created to give New Jersey a competitive edge against surrounding states.
The incentive supplies up to $5,000 annually for up to 10 years per job retained.
2. ERG – ERG, the Economic Redevelopment and Growth program, has residential and commercial applications. It allows developers to fill revenue gaps in projects. The program is for people building residential or commercial units for purchase or lease.
3. BEIP – BEIP, Business Incentive Employment Program, is a subsidy initiative that was done away with in the 2013 reforms. The program was for businesses expanding or relocating in New Jersey. It allowed companies to withhold up to 80 percent of new employees’ state income tax.
4. BRRAG – BRAAG, Business Retention and Relocation Assistance Grants, were done away with in the 2013 reforms. Initially, they were available for businesses relocating in New Jersey and retaining jobs or New Jersey businesses making capital investments at their original location.
The incentive supplied up to $2,250 annually for up to six years per job retained.
The program was said to help “companies preserve jobs, expand operations, and reinvest in the State of New Jersey.
5. Urban Transit Hub – Urban Transit Hub incentive packages, which were done away with in the 2013 reforms, are only for businesses making investments in designated areas. Urban Transit Hubs were located within half a mile or New Jersey Transit, PATH, PATCO or light rail stations in Camden, East Orange, Jersey City, Elizabeth, Newark, New Brunswick, Hoboken, Trenton and Paterson.
Applicants could apply for tax credits equal to up to 100 percent of the capital investments they made within an eight year period.
The package was designed to spur investment by incentivising expansion around transit hubs.