(Editor’s note: To be clear, this story/chart is not taking a position on tax credits, nor is it showing the net benefit/economic impact that come with incentives (and they always are bigger than the incentives). It’s just a nice breakdown. — Tom Bergeron)
New Jersey Treasurer Elizabeth Muoio raised a few eyebrows earlier this month when she stated — in a letter to the Legislature — that the state is anticipating losing $1 billion in revenue annually over each of the next four years due to the potential utilization of tax credits.
The Department of the Treasury offered more specifics in data it released to ROI-NJ on Wednesday, giving an annual breakdown.
Based on numbers provided by the Department of Treasury, the Economic Development Authority-approved tax credits will cost the state potential revenue of:
- $1.11 billion in fiscal 2020;
- $1.16 billion in fiscal 2021;
- $1.26 billion in fiscal 2022;
- $1.15 billion in fiscal 2023.
The numbers are based on both old and new incentive programs, including Grow New Jersey, Urban Transit Hub, Business Employment Incentive Program, Net Operating Loss, Economic Redevelopment & Growth, Angel Investor, Business Retention and Relocation Assistance Grant, Film, Brownfields and Wind credits.
The Grow NJ program accounts for an increasingly significant portion of the revenue loss. In fiscal 2016, the total was less than $100 million. By FY2023, Grow NJ would account for more than $500 million of the $1.15 billion in credits.
By fiscal 2021, the old BRRAG program phases out, along with Brownfields. Meanwhile, wind credits get introduced in FY2021 and film tax credits will affect the budget for the first time in FY2020 since they were last used, in FY2015.
According to a Treasury spokesperson, the ERG and Grow NJ incentives are delayed by up to three years after they are approved by the EDA.
Muoio made the statement in a letter that was submitted when the Legislature held a joint committee hearing on Feb. 13 to focus on the state comptroller’s audit of the EDA’s tax credits.
The audit revealed that many of the older incentive programs are still costing the state money, and that the EDA does not have sophisticated internal controls to verify if companies meet the requirements of their incentive.
Since fiscal 2012, the state has increasingly seen an increase in the loss of revenue due to tax credits.
Some experts have criticized the information released by the Treasurer, saying it does not consider the revenue gained by the companies staying in the state rather than leaving.
Former Sen. Ray Lesniak supported the tax incentive programs under Gov. Chris Christie and told ROI-NJ Thursday that the state is taking the information out of context.
“The Treasurer misleads the public by not stating the billions gained by the state treasury because of tax incentives and the more than one hundred thousand jobs they generated and saved,” Lesniak said. “Instead of using simple math, the treasurer uses incorrect math to gaslight the issue. It’s a lie to say this is what (the state) is not getting. It’s a distortion and it’s misleading.”
Other economy and tax experts also pointed to the parameters of the Grow New Jersey legislation, as an example, which requires taxes generated to equal the amount of the credit.