Tax incentive programs are a key tool in New Jersey’s economic development strategy because they help offset the impact of the state’s challenging business climate, and they need to be maintained if the state is going to continue to produce private-sector jobs, the New Jersey Business & Industry Association said today.
Andrew Musick, NJBIA vice president for Government Affairs, told legislators that the Garden State’s high tax rates put it at a competitive disadvantage in the region, as well as the nation. Without a robust incentive program to offset them, New Jersey would find it difficult to attract companies that provide quality employment opportunities for New Jersey residents.
“There are many great qualities that attract businesses to New Jersey, such as our highly educated workforce and accessibility to major markets, like New York City and Philadelphia,” Musick said. “However, the high cost of doing business and high cost of living serve as a barrier to entry into our state. As such, tax incentives play a key role in keeping New Jersey competitive with surrounding states.
“New Jersey’s innovative economic development incentive programs position the state to ‘come out on top’ in an extremely competitive environment by enticing companies to relocate, expand and invest within our borders versus a regional competitor,” he said.
Musick was invited to testify today before a joint hearing of the Senate Economic Growth and Assembly Commerce and Economic Development Committees on the state’s economic development strategy.
“NJBIA believes that responsible tax incentives play a key role in our economic development strategy to attract and retain both large and small businesses,” Musick stated. “It should be our goal as a state to become a regional, national, and world leader in retention and attraction of business. Additionally, NJBIA continues to support transparency, along with sufficient monitoring and oversight of these programs to ensure that the state is getting the most back for its investments.”
Musick noted that most states use economic development incentives, but trying to compare New Jersey’s program to them is difficult, because states tailor incentives based on their individual economic characteristics and the cost of doing business in their particular state.
They do have one thing in common: “Ultimately, these investments create additional employment opportunities for residents which support a healthy, growing economy,” he said. “New Jersey is no different.”
While New Jersey’s programs were revamped in 2013, there is always room to recalibrate and improve. Musick offered several recommendations to:
- concentrate incentives primarily on new jobs, rather than for “retained” existing jobs at risk of relocating from New Jersey or being eliminated;
- increase the state’s return on investment on incentives in terms of new employment, capital investment, and overall economic and fiscal benefits;
- increase the documentation required for the amount of incentives needed on a project‐by-project basis;
- expand access to small business and rapidly growing technology companies;
- focus a percentage of future investments on high‐growth sectors;
- exercise caution on the use of caps on total awards, as market and economic conditions may shift.
He also said state economic development policy should include improving New Jersey’s innovation ecosystem. He cited several recommendations from NJBIA’s Indicators of Innovation report, including:
- analyze the impact a policy will have on New Jersey’s overall regional business climate prior to implementation;
- increase thresholds for those investing in R&D and small emerging technology businesses, specifically the Research and Development Tax Credit and the Angel Investor Tax Credit;
- increase venture capital investment;
- support New Jersey colleges and universities to drive increased federal R&D funding;
- increase incubator and accelerator presence at or near research institutions; and
- provide employers with the flexibility to structure their workforce in a way that is reflective of the innovation economy.