New Jersey Bets Big on Tax Incentives
According to a recent article in Governing magazine, New Jersey has been investing heavily in incentives as an economic development strategy. A Governing analysis found that the state's five major incentive programs awarded an estimated $1.95 billion to companies since 2011, which is more than the previous 15 years combined. “New Jersey has gone off the charts in the types of incentive deals it offers,” Dan Levine, a former assistant state treasurer who now runs MetroCompare, a corporate relocation firm, told Governing. “We’ve just got into a cycle of doubling down on incentives.”
Proponents of the incentives say that they encourage business growth and relocation and help offset the some of the state’s relatively high tax rates, like the real estate tax. Critics of the incentive-based strategy argue that the payoff isn’t clear. “We don’t see the type of job creation we would have expected,” Levine told Governing, “and it’s a very legitimate public policy question.”
Of course, New Jersey isn’t the only state to use tax incentives to lure new business in or keep their current businesses going. Every state uses tax and financial incentives to varying degrees. From the 1970s into the late 1980s and early 1990s, the number of states across the country providing tax and financial incentives to businesses and the types of incentives being offered increased significantly. Over the past 10 years, the number of states offering incentives and the types of incentives available has become relatively stable.
In 1977, at least 28 states offered tax concessions or credits to businesses for equipment and machinery, goods in transit, manufacturers’ inventories, raw materials in manufacturing and job creation. In 1998, the number of states offering those incentives had grown to 42—the same number in 2012 offered all of these exemptions.
The number of states across the country offering financial incentive programs also increased over the past three decades. In 1977, fewer than 20 states offered special low-interest loans for building construction, equipment, machinery, plant expansion and establishment of industrial plants in areas of high unemployment. By 1998, more than 40 states offered those incentives—a number that remained essentially the same during the next decade and a half.