Murphy blocks extending corporate tax breaks that stirred up huge political brawl

Updated Aug 23, 2019

Gov. Phil Murphy on Friday vetoed legislation to extend the state’s two corporate tax incentive programs into 2020, saying they “wasted taxpayer money on handouts to connected companies instead of creating jobs and economic growth.”

The Democratic governor, who launched a controversial investigation into whether tax breaks were improperly awarded under his predecessor, had vowed to block the Legislature’s extension of the Grow New Jersey Assistance and Economic Redevelopment and Growth Grant programs that expired at the end of June.

A bill passed by the Senate and Assembly would extend them through January.

In a message accompanying his veto, Murphy said “New Jersey’s tax incentive programs are some of the most expensive and least productive in the nation.”

“The return on investment the State achieves through these programs is unacceptable and the ability for well-connected interests to exploit the many loopholes of the programs is shameful,” he said.

The Economic Development Authority has awarded more than $11 billion in tax breaks to corporations since 2005, much of that under former Gov.Chris Christie. The majority — $8.6 billion — was awarded within the Grow and ERG programs, though only $400 million in tax credits have actually been paid out. That figure is expected to soar to $1 billion annually starting this year.

With the extension bill, the Legislature wanted to buy time to make changes to the incentive programs. But Murphy has said New Jersey’s corporate tax breaks need wholesale reform and not a temporary extension and minor tweaks.

Murphy used his conditional veto to rewrite the Legislature’s bill to look like his own plan for a new generation of tax incentives, capped at $400 million a year.

In addition to capping monetary awards, the governor wants tax breaks focused on startups, incubators and small businesses.

Lawmakers have expressed opposition to imposing any cap that would require the state to turn businesses away.

“He knows we’re never going to concur with it, so we’ll continue to try to find a solution,” Senate President Stephen Sweeney, D-Gloucester, said Friday. “Eventually we have to come to an agreement."

Murphy was forced to act on the bill after the Senate and Assembly called members to quorum for Friday afternoon. Typically the governor must sign or veto a bill within 45 days of it hitting his desk, unless lawmakers are on recess. But he must act when the legislators reconvene after the 45-day period.

Michele Siekerka, president of the New Jersey Business & Industry Association, warned the state has been unarmed since July in the interstate competition for businesses and jobs.

“To achieve the goal of a responsible and comprehensive tax incentive program, our policymakers must work together to deliver a program that makes New Jersey regionally competitive. Trying to accomplish this through a conditional veto process does not lend itself to this outcome,” she said.

“We need our policymakers to come together immediately, sort out their differences and get a program back on the books that will allow our state to get back in the game.”

While the tax incentive programs have enjoyed much support in the Legislature, a January audit found widespread problems and insufficient oversight of the roughly $11 billion in approved tax breaks. The report said the Economic Development Authority may have improperly awarded, miscalculated, overstated and overpaid" tax credits to some companies.

Murphy appointed a task force to probe the awards, which said in a June report the EDA did not have adequate procedures in place to vet applications, including a failure to pick up on misstatements that would have led to the rejection of some applications or a significant reduction in the size of certain awards. It also claimed that the legislation that created the incentive program was largely shaped by special interests, including those close to South Jersey political powerbroker George E. Norcross III.

The group’s work sparked a legal battle brought by lawyers for Norcross and others.

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