No issue has defined Gov. Philip D. Murphy’s first term in office more than corporate tax incentives. He railed against them as a Democratic candidate for governor and, once elected, initiated an investigation that exposed the program he inherited from his Republican predecessor as a poorly managed boon for politically connected firms.
Yet on Monday, the State Legislature, with Mr. Murphy’s blessing, approved a new tax incentives bill, and the sheer size of it — as well as the breakneck speed at which it was introduced and passed — was shocking, even in New Jersey.
Legislative leaders and the governor’s aides have said that the $14 billion incentive package to encourage businesses to stay in, or move to, New Jersey, provides extra protections against fraud and will be a vital component of the state’s ability to recover from the pandemic.
But the move has outraged good-government and progressive organizations that for years have stood in lock step with Mr. Murphy, helping the first-term Democrat to notch signature wins on issues that ranged from raising taxes on income over $1 million to legalizing marijuana.
The program, known as the New Jersey Economic Recovery Act of 2020, was introduced just last Wednesday and passed both houses on Monday in less than an hour, after brief speeches citing the need to jump start an economy decimated by the coronavirus.
It is considered one of the largest packages of corporate tax incentives in the country and comes a month after New Jersey borrowed $4.28 billion to plug a pandemic-related budget gap.
“Why must New Jersey always be an outlier, in a bad way, when it comes to democracy and, in a terrible way, when it comes to how we spend and provision money?” Sue Altman, the leader of New Jersey Working Families, a progressive group backed by Mr. Murphy, said in a Senate budget hearing on Friday.
“Trickle-down economics doesn’t work and it hasn’t worked since the 2013 bill,” she said.
Tax incentives became a lightning rod for criticism during Mr. Murphy’s first two years in office and were the subject of a contentious investigation that pitted the governor against his onetime political foe, George E. Norcross III, a South Jersey power broker who benefited significantly from the tax-incentive program.
That program, the Economic Opportunity Act of 2013, had been crafted with help from a well-connected Democratic lawyer, and provided few guardrails to protect the state against fraud. It was backed by Gov. Chris Christie, a Republican, and gave out nearly $7 billion in tax breaks, according to an aide to Mr. Murphy.
In one egregious example, 12 companies cashed in on $100 million in tax breaks after threatening to leave New Jersey for the same office complex in New York, even though most had never seriously considered relocating.
The issues surrounding incentives reached a fever pitch in November last year, when Ms. Altman was targeted by state troopers and dragged out of a hearing where Mr. Norcross was testifying.
Mr. Murphy, who is running for re-election next year, had resisted earlier attempts to reauthorize a tax-incentive program after the 2013 program expired 18 months ago.
But almost without warning, state leaders on Wednesday made public a draft of the bill calling for $11.5 billion in tax incentives over seven years, then quickly held simultaneous hearings in the Senate and Assembly on the matter.
After more than 100 pages of amendments to the new incentive bill, the package did get changed — increasing to $14 billion, after an addition of about $2 billion in tax breaks for the film and television industry.
“When you rush things in Trenton, bad things happen,” said Brandon McKoy, president of New Jersey Policy Perspective, a left-leaning research group typically aligned with the governor.
Aides to Mr. Murphy said that there was a desire to capitalize on the momentum once the deal was brokered last week so that the program can be up and running once the economy is able to reopen more fully.
Darryl Isherwood, a senior adviser to Mr. Murphy, said the governor “values the advocacy and passion of his progressive allies, even when there are disagreements.”
“While every piece of legislation is a product of compromise and subject to give and take,” Mr. Isherwood said, “the bill on the whole institutes the reforms that are desperately needed to make sure our economic development programs work for the benefit of all New Jerseyans.”
The bill has earned praise from many business and municipal leaders as an important tactical move that will ensure that New Jersey is prepared with a package of incentives once the economy begins to revive from its coronavirus-related slump.
“It’s comprehensive and fair,” said Assemblywoman Eliana Pintor Marin, a Democrat from Newark and a sponsor of the bill. “We need the tools and incentives provided in this legislation to rebuild our economy and get our residents working.”
Tim Sullivan, chief executive of the state’s Economic Development Authority, has highlighted the extra state oversight built into the program to safeguard against fraud, as well as incentives to rehabilitate toxic brownfields and historic sites and to build grocery stores in so-called food deserts.
The legislation also creates “evergreen investment” partnerships, which would generate funds for small start-up businesses by selling tax credits to established corporations.
The bill establishes an inspector general within the E.D.A. and subjects chief executives to perjury penalties if they misrepresent information related to requests for tax breaks.
Ras J. Baraka, the mayor of Newark, said that he believed the legislation would help his city recover from the pandemic.
“The brownfield redevelopment incentive program — that is incredibly important for us,” he testified on Friday.
Governor Murphy had insisted on spending caps to avoid some of the problems highlighted during the investigations into the 2013 tax breaks. The current bill does include a $1.5 billion annual cap for a core component of the program, but critics said the figure was so high it could not be considered a cap.
“It’s almost meaningless,” Sheila Reynertson, a budget and tax policy analyst with New Jersey Policy Perspective, said in an interview. “It really puts into question: Do we have any stewards of the people’s money in this administration?”
Several of Mr. Murphy’s most loyal supporters said they were given no advance warning about the size of the deal, leaving them to glean details about the costliest piece of legislation to cross lawmakers’ desks in years from social media and a two-paragaph news release.
Dena Mottola Jaborska, the associate director of New Jersey Citizen Action, a nonprofit watchdog, said the timing of the bill — a month after the state borrowed to balance its budget — was particularly offensive.
“New Jersey can’t afford it,” she said.
The relief packages designed to help those suffering during the pandemic, she added, are “like pennies compared to what they’re handing over to corporations.”
In addition to the $1.5 billion available to corporations each year, there would be $2.5 billion set aside to reduce the taxes for up to 10 large-scale “transformative projects,” not unlike the Amazon deal that progressive groups helped to scuttle in Queens.
“The governor came in as a breath of fresh air in Trenton — a reformer, a progressive,” Ms. Altman said in an interview. “Looking ahead, we’ve got an election on the horizon and hopefully a next term. It’s a good opportunity for the governor and progressive movement to get back in step about what priorities are best for New Jersey.”
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