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Murphy seeks new tax credits, but lawmakers raise questions

February 18, 2019

TRENTON, N.J. (AP) — Tax incentives that New Jersey enacted during Chris Christie’s administration to lure businesses to the state are set to expire this year, and Gov. Phil Murphy wants to scrap his predecessor’s proposals.

But his fellow Democrats who control the Legislature drafted the incentive programs that Murphy opposes and are skeptical about an audit the first-year governor conducted.

Murphy says the audit shows the tax incentives resulted in about $8 billion in credits being approved under the Republican Christie went into a “black hole.”

The state comptroller, who conducted the audit, however, said it found simply that the state’s Economic Development Authority failed to put checks in place to determine whether businesses that got credits created the jobs they were required to.

The tax credit debate comes as Murphy pushes his incentive proposals and lawmakers held a hearing on the governor’s audit last week.

A closer look at the issue:

WHY IS THIS AN ISSUE NOW?

Murphy won election in 2017 in part on a pledge that he would undo what he dubbed taxpayer-subsidized giveaways to big companies. One of his first executive orders was to audit the state authority that monitors those incentives.

Earlier this year, the results of that audit came in: The state comptroller looked at 48 companies that redeemed tax credits and found that the development authority failed to put in place a method to confirm that jobs had been created or retained.

Murphy centered much of his State of the State address on overhauling tax incentives in light of that report. At the core of his proposals is capping how much money the state doles out in tax credits.

He said the audit was evidence that the credits had failed to deliver the promised economic benefits and created a task force to further review them.

But Murphy’s claim that the state has lost billions of dollars in revenue because of the credits leaves out important context. In fact, while billions of dollars in credits have been approved by the development authority, it says only about $700 million were redeemed under Christie-era programs. Companies are allowed to redeem the credits only if they retain or create the jobs required under the law.

The programs enacted under Christie expire June 30, so lawmakers now face pressure to draft legislation to continue or replace them as Murphy has called for.

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WHAT DO LAWMAKERS SAY?

The state’s Democrat-led Assembly and Senate held a joint hearing on the audit last week and questioned the governor’s conclusions.

Specifically, they faulted the governor for suggesting there might have been wrongdoing.

“No evidence was presented to demonstrate that companies defaulted on their promises to the EDA or have not complied with their agreements with the state,” Senate President Steve Sweeney said.

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WHAT’S NEXT?

It’s not clear exactly how lawmakers might draft legislation to renew the expiring tax-credit programs.

Murphy’s task force is expected to hold public hearings on the issue, though a schedule hasn’t come out. Already the development authority and Labor Department said they plan to work together to share information to better track whether corporations are hitting their targets to get tax credits.

Sweeney has called on the comptroller to release the names of the 48 companies that were in the sample group of its audit, saying that “if there are any bad actors who are ripping off the state, as some have alleged, the taxpayers have a right to know.”

Comptroller Philip Degnan said during the hearing that it would not be appropriate to release those names.

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