New Jersey Gov. Chris Christie (R) has approved $5.4 billion in corporate tax breaks since he took office in 2010. And on Monday, just before he called for cutting corporate tax rates across the country as part of a national economic policy plan, he vetoed a measure that would allow taxpayers to evaluate if the subsidies are actually working.
The governor issued a conditional veto of A-939, a bill that passed the New Jersey Senate last year and the Assembly in March. Instead of allowing the government to scrutinize his massive tax incentive program, which researchers have said has been largely unsuccessful, the governor and likely presidential candidate wants the incentives to continue without being subject to annual reporting requirements.
Assemblyman Troy Singleton (D), who sponsored the legislation, told ThinkProgress he is disappointed in the governor’s veto, which will leave taxpayers without regular updates on whether or not the incentives are working to stimulate the economy.
“Along with supporting tax incentives, there has to be accountability,” he said. “[Christie] pretty much gutted the proposal from a standpoint of promoting real transparency and accountability.”
Jon Whiten, the deputy director of nonpartisan economic research group New Jersey Policy Perspective (NJPP) which helped the New Jersey legislature create and pass the reporting requirements in 2007, said the bill would have provided taxpayers with information on which companies received subsidies, how many jobs they created, how much those jobs paid, and whether or not they had laid off workers at other sites as a result of the tax break. Even though the prior legislation should have mandated the reports, the state treasury never produced them, saying that privacy requirements prevented it from sharing the information even though other states produce similar reports.
“Anything the state can do to improve the tax expenditure report would be wonderful because it’s good that we have it, but it’s got a lot of holes and it doesn’t really get to issues of whether something is successful or if the tax expenditure is a wasteful or a failure,” he told ThinkProgress. “We’re awarding more and more of these tax breaks every year but we’re not really finding out what’s been happening to past tax breaks.”
When Christie took office in 2010, the tax incentives were part of his plan to spur economic growth amid the recession. But despite his efforts, New Jersey still has one of the worst unemployment rates in the nation at 6.5 percent and only 40 percent of the jobs the state lost in the recession have been recovered. Meanwhile, one in 12 homeowners in the state was in foreclosure in 2014.
According to the NJPP, the more than $5 billion in tax breaks since 2010 have tripled the costs of a job at the companies receiving the awards, so the initiative has actually caused higher unemployment. Many of the subsidies also go toward keeping jobs in the state and not actually creating new jobs.
The subsidies have also only helped a small number of the state’s corporations — 252 of New Jersey’s approximately 200,000 companies — so only one percent of New Jersey businesses have actually benefited, while the other 99 percent have has to make up for the lost revenue.
And the NJPP found that “as many as 9 out of 10 hiring and investment decisions subsidized with tax breaks would have occurred even without the subsidy,” according to a 2014 report.
Even though the subsidies aren’t leading to job creation, Christie is ready to expand the idea across the country. On Tuesday, he proposed a “revenue-neutral” economic policy plan at the University of New Hampshire which would include cuts to income and corporate tax rates and a simplification to what he calls a bloated tax code.
“About the corporate tax rate: Cut it to 25% from 35% and encourage companies to start investing in the U.S. again,” he said in a Wall Street Journal op-ed explaining his economic plan.
Conservatives have long argued that lowering the corporate tax rate grows the economy. As a result, the corporate tax rate reached a 40 year low in 2012. But a study by the Economic Policy Institute found that there is no evidence to support that the tax rate and economic growth are correlated at all.