Allow us to review an old math lesson for Democratic gubernatorial candidate Phil Murphy and his running mate, Assemblywoman Sheila Oliver:
Nine percent of zero is zero.
That 9 percent is the corporate business tax paid by New Jersey’s largest companies. And zero is the amount the state would get from Amazon in increased tax revenue if the tech behemoth chooses to put its HQ2 headquarters in another state.
Yet, in a recent debate with the Republican candidate for lieutenant governor, Carlos Rendo, Oliver raised eyebrows by appearing to walk away from New Jersey’s proposal to offer Amazon some $5 billion in tax incentives to put its planned new headquarters in Newark — which is in Oliver’s district. The city itself would provide an additional $2 billion in incentives under the state’s proposal to lure Amazon’s promised $5 billion investment and 50,000 jobs.
“Christie and (Republican gubernatorial candidate Lt. Gov. Kim) Guadagno gave exorbitant tax credits to very wealthy corporations in the state, and it was upon the premise that it would create jobs,” she said. “It has not created significant numbers of jobs. There are people who live in those communities where those tax credits were given, and you can document there was no new job creation,” she said.
Later, after the debate, Oliver told ROI-NJ’s Anjalee Khemlani: “I do not believe it should be a blank check that is written. I think Ambassador Murphy and I look forward to sitting down with the representatives of Amazon and the city of Newark, and making sure that whatever is done leads to job creation in this state. A tax credit without commitment upon creation of jobs is no benefit to our residents.”
Oliver wasn’t exactly going off message in her comments. While Murphy has agreed to support the state’s bipartisan pitch to Amazon, he has been critical of the $8 billion in “corporate welfare” that the state Economic Development Authority has doled out in tax incentives under the Grow NJ program, which would be the vehicle for the Amazon incentives. Murphy has said he would scale back the program.
The Grow NJ incentives are not particularly popular among many voters — probably because they are wildly misunderstood. This is not cash pulled out of the state treasury and handed to companies. They are credits against future taxes, and they are very much tied to job creation.
Under the proposal put forward by Gov. Chris Christie’s administration, Amazon would be eligible for corporate business tax credits of $10,000 for each new job, and would not get the full $5 billion unless it created the promised 50,000 new jobs over 10 years. The Legislature would have to approve changes to the Grow NJ program, which currently offers credits of only $5,000 per job.
Yes, we’re talking a lot of money here.
But these tax credits have helped New Jersey attract — or retain — thousands of jobs in financially stressed cities. They work. In this case, Amazon is expected to provide a $9 billion boost to the state’s economy. Or, once again, nothing if it does not come to New Jersey.
Amazon, of course, has set off a fierce nationwide competition by seeking proposals for its HQ2. Tax incentives will be part of every proposal. And, befitting a project of this magnitude, those incentives will involve big numbers.
But this isn’t a particularly new approach to luring development. In fact, it’s as old as one of the oldest truisms in business: You have to spend money to make money.