Gov. Phil Murphy hinted at his hopes to end Christie-era tax breaks and push for “tax fairness” – a major talking point as he backed a “millionaire’s tax” last year – as potential points of his budget address next week.
This Tuesday, the freshman Democrat is scheduled to unveil his budget proposal for the 2020 fiscal year, which starts July 1.
Speaking at the New Jersey Chamber of Commerce’s 82nd Annual Dinner in Washington, D.C. on Thursday, Murphy said he hopes the state will do away with the Grow New Jersey tax breaks and Economic Redevelopment and Growth gap financing programs.
Both programs were vastly expanded under former-Gov. Chris Christie, and are scheduled to sunset on July. 1.
“I will speak once again to my commitment to tax fairness for our middle-class families and seniors – and I mention, once again, the countless middle-class taxpayers who are wondering where their promised federal tax cut went,” Murphy said.
Murphy has reiterated that new taxes are still “on the table.” The 2019 fiscal budget included $1.5 billion of new taxes – something his biggest political opponent, Senate President Stephen Sweeney, D-3rd District, has vowed to not repeat.
Assembly Speaker Craig Coughlin, D-19th District, also jumped on opposition to new taxes for the coming fiscal year.
The governor hinted that his five new economic incentive proposals will be built into his budget address. His economic master plan calls for a $500 million “Innovation Evergreen Fund,” wherein the state and venture capitalists will finance startups 50/50.
The plan also calls for two programs mirroring Grow NJ and ERG, but vastly scaled down in the amount of dollars allocated to those programs.
“Let me say, yet again, that I recognize the critical role tax incentives can play in economic development and job creation,” Murphy said Thursday. “That is not – and has never been – the issue. Many businesses represented in this room have benefitted, one way or another, from an incentive. There are many, many good actors here.”
Murphy pointed to a January audit from his administration that pointed to $11 billion of tax breaks the state awarded between 2005 and 2017.
The state had little oversight over those tax breaks, and as a result could not determine whether those companies could actually deliver on the promised economic activity.
“In obligating ourselves to $11 billion in total incentives, we have lost the balance between the rewarding incentives and the ability to maintain investments in the things that will help ultimately help businesses that receive them,” Murphy said.
The Economic Development Authority, which oversees the tax breaks, has criticized the audit because three of the incentives scrutinized no longer accept applications.
And Sweeney has pointed to only roughly $1 billion that the state already gave in tax breaks, suggesting that Murphy’s claims that the state lost $11 billion is misleading. The rest of the tax breaks are given out over a period of 10 to 20 years based on whether the recipients deliver upon promised economic activity.
New Jersey will have to begin spending over $1 billion a year, starting in July, to finance the tax breaks, according to recent data from the State Treasury.
Sweeney and other lawmakers have called for adopting tax credit programs that will largely resemble many aspects of Grow NJ and ERG.
And whether Murphy can push through his new taxes could be a hard sell – data earlier this week from S&P Global Ratings – one of the three main Wall Street credit analysts, suggested that New Jersey could find itself in the red come the end of the current fiscal year on June 30.
Last year’s budget called for 7.5 percent growth, but instead the state has only seen closer to three percent growth.