Governor Phil Murphy signed a bill authorizing as much as $14 billion in corporate-tax credits over seven years, aimed at luring companies to New Jersey and keeping existing ones from moving to lower-cost states.
Murphy, a first-term Democrat running for re-election in November, let the previous $11 billion tax-incentive program lapse in 2019 as his administration reviewed questionable deals awarded to politically connected business owners. The governor has said he supported incentives but saw regulatory flaws in the program.
He and lawmakers had debated changes for more than a year, and the bill’s final version had 249 pages. On Dec. 15, he and fellow Democrats who control both legislative houses announced an agreement that he said would target under-served communities, bolster small businesses and support historic preservation.
“This is a bill -- the more you read it, the more you get into it, the better it looks,” Murphy said at the bill-signing at a Hamilton chocolate shop. Advocates, including lawmakers and business groups, said the legislation came just in time, with high unemployment and business failures as a result of the pandemic.
The measure includes annual caps, labor protections, tools to support innovation and tough compliance standards, according to Murphy. It passed both legislative houses on Dec. 21.
Economic development programs like New Jersey’s have led to debate over whether tax incentives are an effective way to lure employers and create jobs. Business groups have said it is necessary, while taxpayer groups have called it a waste of money.
New Jersey’s high costs give it the worst business tax climate in the nation, according to a ranking by the Tax Foundation. At the start of 2020, New Jersey had a 9% corporate tax rate. Murphy signed a budget in September that extended through 2023 what was to be a temporary 2.5% surcharge on corporate income of more than $1 million, making the effective tax rate 11.5% on that amount. Only Iowa has a higher rate.
This article was provided by Bloomberg News.