The New Jersey Business & Industry Association testified today that it is paramount New Jersey puts a strong tax incentive program in place to attract and retain business in order to offset the high cost of doing business in the state.
NJBIA Vice President of Government Affairs Andrew Musick told the Senate Select Committee for Economic Growth Strategies today that because New Jersey has some of the highest business taxes in the region and the nation, it cannot compete with neighboring states if there is not a quality mechanism to level the playing field.
“Without robust tax incentive programs, New Jersey would struggle to compete in attraction and retention of businesses, jobs and capital investment,” said Musick, who was part of a panel of New Jersey business leaders invited to speak to the committee about the Grow NJ and Economic and Redevelopment and Growth (ERG) grant programs. “Ultimately, these investments create additional employment opportunities for residents, who, in turn, support a healthy, growing economy. It should be our goal as a state to become a regional, national, and world leader in retention and attraction of business.”
The Grow NJ and ERG programs expired on June 30. Musick explained that, by many measures, these programs achieved their stated goals by creating and retaining jobs in the state, while generating capital investment. The Grow NJ program has been responsible for nearly $1 billion in capital investment and over 18,000 new and retained jobs, Musick said, while the ERG program has created over $1.2 billion in capital investment.
Companies have to earn their benefits by generating new tax revenue and satisfying at least 80% of all job and capital investment requirements, prior to receiving a tax credit, Musick explained.
NJBIA submitted several recommendations for future economic development incentive programs. They included:
- Reducing overall levels of investment in incentives, given the improvement in economic conditions;
- Concentrating incentives primarily on creating new jobs by limiting the incentives that can be earned by retaining at-risk jobs;
- Further increasing New Jersey’s return on investment and eliminating the need for an annual tax credit cap by reducing incentive amounts and expecting more new employment, capital investment, and overall economic and fiscal benefits;
- Continuing to strengthen program governance, increasing the documentation required on the amount of incentives needed for New Jersey to be successful in winning on a project-by-project basis, and considering a lower threshold on applicable projects;
- Further expanding access to incentives for small businesses and rapidly growing technology companies;
- Focusing a percentage of future investments on high-growth sectors (Life Sciences, Information Technology, Financial Services, Pharmaceuticals, Manufacturing and Transportation/Logistics), which would leverage large economic development impacts for New Jersey;
- Promoting investment and employment in distressed municipalities, locations that enable and promote sustainable development, live-work-play environments that are served by mass transit options, and areas with under-utilized assets;
- Maintaining the transferability and monetization of tax credits, as many technology, life science, and Fintech startups have no Corporation Business Tax (CBT) liability in their early years or are otherwise unable to utilize the tax credits;
- Encouraging companies that receive an award to incorporate a workforce development component at a local secondary or post-secondary school to train future employees; and
- Maintaining strict caps on base awards and bonuses recalibrated for today’s market.
Musick’s full written testimony can be found here.