Gov. Phil Murphy signed an executive order on Friday to audit controversial tax subsidy programs that have doled out more than $8 billion in corporate tax breaks since 2010.
Murphy’s executive order directs the state comptroller’s office to audit the Economic Development Authority’s (EDA) tax incentive programs, which offer subsidies to businesses that create or keep jobs in New Jersey. Critics call the tax breaks, which were ramped up under Gov. Chris Christie, a form of corporate welfare that has starved the state of much-needed revenue.
The audit will specifically examine the Grow New Jersey Assistance Program, the Economic Redevelopment and Growth Grant Program and predecessor programs since 2010.
Under the executive order, the audit must compare the economic benefits received against what was promised by applicants for tax breaks; examine the quality of jobs created, including salary and benefits levels; review the EDA’s decision-making process; and look at a company’s application process, including how much was spent on fees for lobbyists and consultants.
“This is not just a question of bean counting or dollars and cents. It’s about value. It’s about return on investment,” Murphy said at a signing event in Princeton.
The governor announced the audit a day after Amazon revealed that Newark is still in the running to land the web giant’s second headquarters. New Jersey is offering Amazon up to $5 billion in tax incentives under one of the programs that will be targeted by the comptroller’s audit. Murphy, who campaigned against corporate tax giveaways, acknowledged the tax incentives offered to Amazon helped put Newark in the top 20 cities the company is considering.
“I know it helped,” Murphy said. “It certainly didn’t hurt.”
He initially said a deal to bring Amazon to New Jersey must “work for everybody” and “can’t just work for one side.” But pressed for details, Murphy said he wouldn’t try to change the state’s tax subsidy proposal to the web company, which is promising roughly 50,000 jobs and $5 billion in investment with its second headquarters. The city of Newark is offering to kick in an additional $2 billion in tax breaks for a total offer of $7 billion in subsidies.
“This was a once in a lifetime. Not everybody comes along with 50,000 jobs,” Murphy said.
The EDA has approved $8.4 billion in tax breaks since Christie took office in January 2010, compared to just $1.2 billion in subsidies awarded during the previous decade, according to New Jersey Policy Perspective (NJPP), a liberal think tank that opposes the incentive programs.
Murphy said the state spends $162,000 in economic incentives for each job, while Massachusetts spends $22,000 per job.
New Jersey has among the worst finances of any state in the nation, analysts say, and has had its credit downgraded 11 times under Christie due in large part to its revenue shortages. NJPP has said the state’s tax giveaways have limited its ability to invest in schools, transportation and other areas. In several cases, the incentives have not created but moved existing jobs from one part of the state to another.
“Gov. Murphy took an important step toward righting New Jersey’s economic-development ship with today’s executive order calling for a robust, independent evaluation of the state’s use and abuse of corporate tax breaks,” NJPP Vice President Jon Whiten said in a statement. “As we’ve often noted, better evaluation is a critical part of comprehensive subsidy reforms that can usher in a more responsible approach to economic development in the Garden State.”
The tax incentive programs implemented by Christie were approved by the Democratic-led legislature, which recently voted to expand the Grow New Jersey program to make the $5 billion tax subsidy offer to Amazon. It’s unclear whether Democrats would go along with any proposed changes to the state’s incentive programs.
“We will try to put in place legislation going forward that’s consistent with the vision that we come together on as it relates to this state,” Murphy said.