newjerseynewsroom.com

Opponents describe proposals as costly corporate tax give-aways

The Senate Budget and Appropriations Committee Wednesday released seven measures that sponsors maintain are designed to attempt to make New Jersey a more competitive state for business by cutting taxes for companies and creating new incentives for businesses to stay and grow.

The bills are part of the Senate and Assembly Democrats' "Back to Work NJ" legislative initiative to attempt to create jobs and promote New Jersey as a better place for business.

"With unemployment stubbornly stuck above 9 percent, we need to be aggressive in our efforts to retool and reposition our economy," Senate President Stephen M. Sweeney (D-Gloucester) said. "This package is about creating new economic opportunities not only for business, but for working families across the state. For their sake, we can't act fast enough."

"Growing our economy will not only create new jobs, but will ultimately grow state revenues and strengthen New Jersey's bottom line," Sen. Paul Sarlo (D-Bergen), the committee chairman, said "Making New Jersey a better place for business is a crucial stop on the road to fiscal health."

Bill Holland, director of the New Jersey Working Families Alliance, and Deborah Howlett, president of New Jersey Policy Perspective disagree with Democrats that the bills are worthwhile. They said the legislation is little more than a collection of generous business subsidies and costly corporate tax give-aways.

"When the state can't even fully fund its public schools, property tax relief programs or pension obligations it is dead wrong for legislative leaders to give scarce state resources to corporations as tax breaks and subsidies,'' Holland said.

"Members of the committee are voting with almost no information about these bills," Howlett said. "They don't know if they will cost $1 or $500 million. They don't know if they will create a single job. The pubic deserves at least that basic information."

The package of bills dies have the support of the New Jersey Business and Industry Association, which argues the legislation would improve New Jersey's tax climate and help foster partnerships between universities and high-tech businesses.

"This package represents a good effort to address the state's difficult economic conditions in which New Jersey and the rest of the nation now find themselves," NJBIA Senior Vice President Melanie Willoughby said. "We look forward to working with Governor Chris Christie and our legislative leaders on these policies, which will help bolster our economy."

Willoughby said the NJBIA especially supports two initiatives — the single-sales-factor tax reform and a proposal designed to foster partnerships between businesses and institutions of higher education.

The lead bill, as described by Democrats, would alter the state's corporate business tax formula to remove preferential tax treatment which out-of-state companies that offer only products and services received, as opposed to benefiting businesses that are actually based in New Jersey.

By implementing a "single sales fraction," the bipartisan measure (S-1646) is designed to help New Jersey businesses by removing consideration of a company's physical in-state assets from its tax liabilities — a system that, under current law, benefits out-of-state companies.

"It makes absolutely no sense that our tax laws would actually penalize companies that are based in New Jersey and employ New Jerseyans," Sweeney said. He is sponsoring the bill with Sen. Steven Oroho (R-Sussex). "We need to bring business into the state, not drive them out. Eliminating this disparity will go a long way to having our tax code make common sense for business."

The second measure (S-2454) — the "New Jersey Angel Investor Tax Credit Act" — would create specific gross income and corporate business tax credits for start-up investments of up to $500,000 made in New Jersey-based high-tech and biotechnology companies. So-called "angel investors" are individual entrepreneurs who provide the massive capital investments that start-up technology businesses need to get up and running.

"High tech businesses don't just sprout on their own — they very often rely on equity investors willing to take a chance that an idea will become a world-changing technology," Sen. Fred Madden (D-Camden) said. "Offering a direct credit to individuals and businesses will help seed the next generation of companies we will rely on to create jobs for years to come."

Another Madden bill (S-2398) would direct the state Economic Development Authority and the state Commission on Higher Education to work to bring together business and the state's colleges and universities for joint research and development ventures. Madden said such ventures would be especially valuable in the research-driven technology and life-sciences industries.

Senator Nia H. Gill (D-Essex) and Senate Republican Leader Thomas H. Kean (R-Essex) are sponsoring legislation that would enable companies to locate "captive insurance" companies — entities that essentially self-insure themselves and their customers — in New Jersey. More than 25 other states and the District of Columbia have laws regulating captive insurance companies. The measure (S-168) is based on Vermont's captive insurance law, which is credited with making that state the world's third most-common home for captives, generating $13 billion in premiums in the state in 2009.

Another bill would expand eligibility for investors to take advantage of state tax credits for mixed-use development projects located near urban transit centers. The measure (S-2183) would provide developers involved in $50 million mixed-use projects with tax credits of up to 100 percent of a minimum $17.5 million investment in the commercial aspect of the development, and of up to 20 percent for a similar minimum investment in a project's residential component.

Sen. Donald Norcross (D-Camden), the bill's sponsor, said the credits would encourage redevelopment in the state's urban centers, creating construction jobs as well as new homes for business.

Senators Jeff Van Drew (D-Cape May and Jim Whelan (D-Atlantic) are sponsoring legislation (S-2132) that would provide businesses located in one of the state's 33 urban enterprise zones (UEZ's) with a sales tax exemption when purchasing items and equipment for their businesses. Currently, only small businesses with sales of less than $10 million are eligible for the "point of sale" exemption; other businesses must apply to the state for a reimbursement.

According to the state Department of Community Affairs, the UEZ program supports more than 139,000 full-time jobs and has attracted in excess of $26 billion in private investment since its inception in 1983. Nearly 6,500 businesses operate in a UEZ.

The final bill, sponsored by Sen. Sandra Cunningham (D-Hudson), would encourage banks to locate new branches in traditionally underserved areas. The bill (S-2286) would create a new Banking Development District Program in the state Department of Banking and Insurance to work with licensed financial institutions to open the new banking centers. In addition, municipalities would be able to deposit public funds in the new banks, mirroring a similar program in New York State.

"Many New Jerseyans take their local bank for granted," Cunningham said. "For many others, their financial choices are limited to check-cashing storefronts or banks located far from their homes. Not only should we be promoting sound financial practices among all residents, but these new banks can create new job opportunities in the communities where they locate."

The bills move to the full Senate where they are expected to gain approval.

— TOM HESTER SR., NEWJERSEYNEWSROOM.COM