NJ Advocates Worry That Huge Corporate Tax Cuts May Be Around The Bend

NEW JERSEY — If you want to build up New Jersey, the money has to come from somewhere. And that’s why some advocates say they’re worried that a wave of corporate tax breaks may be creeping around the bend in the Garden State.

Speaking in the wake of Gov. Phil Murphy’s latest state-of-the-state speech – during which he slammed other U.S. states for giving “huge tax breaks to the wealthiest and most powerful” by raiding schools and community programs – several social justice groups and policy experts said New Jersey’s governor needs to turn his attention to his own backyard.

They were referencing a controversial corporate business tax surcharge set to expire at the end of 2023. The 2.5 percent surcharge was levied on businesses earning over $1 million in 2018, the year after Murphy was first elected. It was originally scheduled to phase down in 2020 and 2021. Instead, it was extended by the state Legislature in 2020 and will not sunset until Jan. 1, 2024.

Some Republicans, such as Assemblyman Christopher DePhillips (District 40), have been blasting New Jersey’s “highest-in-the-nation” 11.5 percent corporate tax rate, with DePhillips recently pushing for a bill that would lower the rate to an overall 2.5 percent.

“The business community knows that Democrats in Trenton are addicted to taxing and spending,” DePhillips said. “Democrats cemented their bad business reputation when they passed the additional 2.5 percent corporate surcharge in 2018 and then added insult to injury by extending it in 2020.”

But according to other political pundits, letting the surcharge expire would be a disaster.

Peter Chen, a senior policy analyst for nonprofit think tank New Jersey Policy Perspective (NJPP), said it would mean a huge tax cut for some of the biggest businesses in the state, Gothamist reported.

“Blowing a $600 million hole in the budget is just not a path to fiscal sustainability,” Chen said.

Nicole Rodriguez, the group’s president, agreed.

“Opportunity for all requires new, ambitious investments in families who have historically been left behind and need the most help,” Rodriguez said after watching Murphy’s speech on Tuesday. “It requires fully funding our schools, increasing tax credits and safety net programs for those with the lowest incomes, along with sound tax policies to support those programs in the short- and long-term.”

“The governor slammed states that hand huge tax cuts to wealthy individuals and mega-corporations, but he was silent on how his administration will make sure New Jersey doesn’t follow that same path,” Rodriguez continued. “Some legislators are poised to hand over $600 million in tax cuts to the most profitable corporations in the country, including Amazon and Walmart, even if it threatens the fate of the opportunity-building programs the governor highlighted in his address.”

“Opportunity for all will not be possible with a tax code that favors a wealthy, select few,” Rodriguez added.

• Read More: These NJ Companies Make More In An Hour Than You Earn In A Lifetime: Study
• Read More: Report Blasts NJ Companies, Billionaires for Being 'Pandemic Profiteers'

The NJPP isn’t the only group concerned about corporate tax breaks in the state’s future. Other advocates who weighed in after Murphy’s speech on Tuesday included:

New Jersey Citizen Action Executive Director Dena Mottola Jaborska – “Since the more urgent days of the pandemic, when he provided solid leadership, Governor Murphy has advanced very few new supports for New Jersey’s working families and low-and-moderate income residents. This is in contrast to the transformative accomplishments of his first term … We hope the increasing influence of corporate interests on the Murphy administration is not a preview of the next two years. We are deeply concerned with the possibility that the governor could champion tax cuts for corporations. Past tax reforms that ensured corporations pay their fair share have raised the critical funding needed to support many key reforms that Murphy accomplished in his first term. And they have restored our state’s once damaged fiscal health, another major accomplishment for which the governor deserves high praise. We urge Governor Murphy to reject tax cuts for corporations and return to championing the transformative reforms struggling New Jerseyans need to ensure economic security for their families and their communities.”

Steven Mercado, a leader with Make the Road New Jersey – “We urge Gov. Murphy and the legislature to prioritize programs that will strengthen working families of color, including expanding health care and the safety net, providing critical workplace protections and building schools where we all can thrive. We can’t do any of this if we let the Corporate Business Tax surcharge expire at the end of the year. This would provide an enormous tax cut to the biggest and most profitable businesses — including wealthy, multi-state corporations like Amazon, Walmart, and Bank of America, at the peril of working families in New Jersey.”

New Jersey Alliance for Immigrant Justice – “New Jersey is one of the most diverse states in the nation. Our state population is effectively half people of color and nearly 1 in 4 New Jerseyans is an immigrant. The true ‘state of our State’ is Diversity. The ‘new’ New Jersey is one where people of all backgrounds — regardless of identity, place of birth, or immigration status — have their fair share of resources and the rights that keep their communities whole, empowered, and safe. But the ‘new’ New Jersey can only be built by addressing the structural and systemic inequities of old. That means requiring corporations and the wealthy to pay their fair share in taxes and reinvest that money into tailored, robust services for everyday New Jerseyans. It also means addressing historic barriers to access and civic participation by investing in Language Access, passing election reforms that strengthen our democracy, and using data disaggregation to better represent New Jersey’s increasingly communities. Finally, a ‘new’ New Jersey can never be born unless we abandon the outdated and often dangerous idea that safer communities can only exist alongside harsher punishments. The ‘new’ New Jersey must not roll back the progress we have made on criminal legal reform. Instead, our communities urgently need stronger protections so they can stand up for their rights without fear of deportation or detention.”

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Some pro-business groups have offered a different take on the governor’s speech, however.

The New Jersey Business and Industry Association (NJBIA) praised some of the state’s recent developments, such as the signing of a bill that speeds up construction inspections and “bolstering the film and television industry.” But the group opined that the administration can – and should – be doing more to address affordability for small businesses.

"In NJBIA's 2023 Business Outlook Survey, 82 percent of businesses said New Jersey is either somewhat unaffordable or not affordable at all for business,” NJBIA president and CEO Michele Siekerka said.

“That is not rhetoric,” Siekerka added. “Rather, it reflects what we and our business advocacy peers hear literally every day.”

According to Siekerka:

“Recall that New Jersey had more than $6 billion in federal COVID relief funds. Yet the governor alone stood in the way of legislation that would have used it to partially or fully relieve our small businesses of this burden - as most states in the nation appropriately did. This $1 billion unemployment tax increase on business, which is a tax on jobs and was solely the result of some of the longest pandemic shutdowns in the nation, now costs each New Jersey business hundreds of dollars more per employee, per year, than prior to the pandemic. Similarly, as we heard much about ANCHOR property tax relief today in the governor’s address, it must be noted again that New Jersey businesses were excluded from that assistance – even though they pay nearly half of the state’s property taxes. We do appreciate the grants that have been made available to New Jersey businesses under Governor Murphy. But targeted grants for some do not compare to the deserved, comprehensive relief needed for the greater whole of New Jersey’s overburdened small business community.”

“We should avoid being a national outlier for business taxes and high regulatory costs, not embrace it,” Siekerka concluded.

‘THROWING TAX BREAKS AT CORPORATIONS’

During his state-of-the-state speech, Murphy also referenced another corporate tax debate that arose during his first term.

That controversy centered around more than $11 billion that the New Jersey Economic Development Authority (NJEDA) approved for large companies over a 14 year-span. The tax breaks were supposed to help bring jobs to New Jersey – and keep corporations from moving to other states. But officials and advocates have since alleged that the agency merely acted as a rubber stamp for wealthy corporations, and that it may be nearly impossible to tell if the tax breaks actually produced the types of jobs that politicians promised.

Most of the subsidies were given before Gov. Murphy took office, during the era of former governor Chris Christie.

• See related article: Task Force Probes New Jersey's $11B 'Corporate Gravy Train'
• See related article: NJ Corporate Tax Break Controversy (What Changed, And What Hasn’t)

“Before our administration took office, our economic focus could be summed up as: find a big company, any company, and throw a big enough tax break at them to get them to move to – or stay in – New Jersey,” Murphy said Tuesday.

“That way of doing things came with limited successes,” he said. “But the true downside of that way of doing things was that, behind it, there was no strategy. No one ever stopped to ask what the New Jersey of 20 or 50 years down the line should look like. The only question that was ever asked was whether a deal could get done fast enough so it could be used in the next campaign commercials.”

The governor continued:

“That is not how this administration has looked at job growth or economic development. Through the CEO of the Economic Development Authority, Tim Sullivan, and his team, our focus from day one has been to make New Jersey the place where the companies of tomorrow will come to plant their flags. We worked to overhaul our entire offering of economic incentives – to make them more responsive to our economic realities, more focused on our core economic strengths, and more persuasive to the key business sectors and start-ups we know have the ability to grow over time, including a first-in-the-nation public-private venture fund. When we first proposed our reformed incentives program, I noted that we needed to be nimble and to work at the speed of business. And so today, in that spirit, I call for us to live up to this by coming together to make a necessary update. We must recognize that in the new, post-pandemic business environment, not every new job created for a New Jerseyan is going to be housed in a physical office in New Jersey. For many New Jerseyans, working remotely is here to stay. So, let’s take this moment to focus on incenting jobs in New Jersey, wherever they are, regardless of whether they are in an office building in Newark or at a kitchen table in Cherry Hill.”

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