- New Jersey is trailing other states because it has not adopted a plan for regular evaluation of tax incentives.
- The state has contracted with researchers from Rutgers, the state university of New Jersey, to complete a one-time study of incentives by 2018.
- New Jersey has made billions of dollars in incentive commitments in recent years.
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Under a 2013 law, New Jersey is scheduled to complete a “comprehensive review and analysis” of incentives administered by the New Jersey Economic Development Authority (EDA), the state’s lead business development organization, by July 1, 2018. The law, however, requires only a one-time evaluation, not regular analysis.a
In 2016, the authority contracted with researchers from Rutgers’ Edward J. Bloustein School of Planning and Public Policy to complete the evaluation.b In doing so, New Jersey is following a proven model. Many states, including Tennessee, North Carolina, and Oregon, have received rigorous evaluations by contracting with private consultants or academic institutions.c
The law with the evaluation requirement also included a major overhaul of the state’s approach to economic development. The legislation consolidated several incentives into two primary programs, one focused on creating and retaining jobs and the other on real estate development. As lawmakers intended, this overhaul led to a massive increase in the value of incentives awarded to businesses.d The EDA has authorized around $5 billion in grants and tax credits since the 2013 law was enacted, in many cases committing to provide incentives for 10 to 20 years.e
As these commitments have grown, New Jersey’s use of incentives has been the subject of intense debate. Critics, in addition to worrying that the costs will crowd out other priorities, have pointed out that many of the incentive deals are aimed at existing New Jersey firms that are moving within the state. They argue that these deals do little to boost net economic activity in the state.f On the other hand, EDA and other defenders of the incentives say that the companies they have helped were at risk of leaving the state. They also argue that the assistance is the only way to get major businesses to relocate to places like Camden, one of the most impoverished cities in the country.g
High-quality evaluations in other states have helped answer the questions that are most relevant for this debate, such as to what extent incentives influence business decisions as opposed to rewarding what companies would have done anyway, and how incentives are affecting net economic activity. If the Rutgers study includes the same level of scrutiny, it will provide valuable information for New Jersey lawmakers, while also representing a first step toward regular, rigorous evaluation.
- New Jersey P.L. 161 (2013), http://www.njleg.state.nj.us/2012/Bills/PL13/161_.HTM.
- Edward J. Bloustein School of Planning and Public Policy, Rutgers, The State University of New Jersey, Study Proposal: Analysis of NJEDA’s Grow New Jersey Assistance and Economic Redevelopment and Growth Programs (March 2016).
- Anderson Economic Group, “The Economic Impact of Business Tax Credits in Tennessee,” prepared for the Tennessee Department of Economic and Community Development and the Tennessee Department of Revenue (Dec. 26, 2016), http://www.tn.gov/assets/entities/transparenttn/ attachments/ Tax_Credit_Analysis_FINAL_12-30-2016.pdf; University of North Carolina Center for Competitive Economies, “An Evaluation of North Carolina’s Economic Development Incentive Programs: Final Report,” prepared for the North Carolina General Assembly (July 2009), http://www.ncleg.net/documentsites/committees/JSCEDI/UNC C3E 2009 final report to NCGA Joint Select Committee on Economic Development Incentives.pdf; Industrial Economics Inc., “Financial and Economic Impact of the Oregon Business Energy Tax Credit,” prepared for the Oregon Department of Energy (May 2, 2011).
- Jim Walsh, “The Pros and Cons of EDA Largesse,” Courier-Post, Sept. 20, 2014, http://www.courierpostonline.com/story/news/local/south-jersey/2014/09/20/pros-cons-eda-largesse/15970097.
- Salvador Rizzo, “Lawmakers Ignoring $7.4B Boom in ‘Corporate Welfare,’ Experts Say,” North Jersey, Dec. 17, 2016, http://www.northjersey.com/story/news/new-jersey/2016/12/17/lawmakers-ignoring-74b-boom-corporate-welfare-experts-say/95554638.
- Jon Whiten, “Corporate Subsidy Overhaul Taking New Jersey Further Down a Dangerous Path,” New Jersey Policy Perspective (September 2015), http://www.njpp.org/wp-content/uploads/2015/09/NJPPEOA-AnniversarySept2015.pdf.
- Walsh, “The Pros and Cons.”