NEW JERSEY – Does the “honor system” work when it comes to tracking corporate tax breaks in New Jersey? It’s an urgent matter, say some advocates – and billions of taxpayer dollars are at stake.
Earlier this week, the state comptroller’s office released an update on the investigation into massive tax subsidies granted by the New Jersey Economic Development Authority (NJEDA).
Much of the controversy revolves around the more than $ 11 billion that NJEDA approved for large companies over a 14-year period. The tax breaks were supposed to help create jobs in New Jersey – and prevent businesses from moving to other states. But officials and advocates have since alleged that the agency only served as a buffer for wealthy corporations, and that it might be nearly impossible to say whether the tax breaks actually produced the types of jobs promised by The politicians.
Most of the grants came before Gov. Phil Murphy took office, during the time of former Gov. Chris Christie.
Wednesday’s update from the Comptroller’s Office looked at what the agency has done – and what it hasn’t – since controversy erupted in 2019. Read the full report here.
According to the Comptroller’s Office, the NJEDA has “made substantial progress” over the past three years, including taking steps to verify that companies actually retain or hire employees they have said they will.
But there is much more that can be done, officials added.
“When billions of dollars in public funds are at stake, it is essential that the NJEDA report transparently and regularly on what happened,” Acting State Comptroller Kevin Walsh said.
The controller’s report indicates:
“What we found was full compliance with 11 recommendations, partial compliance with seven recommendations and non-compliance with three recommendations. We also found that the NJEDA did not seek to recover substantial amounts of money. public funds which she believes should be pursued. “
Here are the three recommendations that the NJEDA did not adopt, the comptroller said:
- “Develop a process for incentive programs to report on their successes and determine if economic benefits have actually been realized. “
- “Require annual reports for incentive program activities that are based on actual performance.”
- “Track the administrative costs associated with tax incentive programs to set the fees that businesses must pay in order to cover the costs of running the program. “
“It’s easy for a business looking for tax credits to promise results, but harder to deliver,” Walsh said.
“The NJEDA’s move on this issue is a major positive change that makes the success of economic incentive programs much more likely,” Walsh said. “So far there is a commitment and a proposed policy, but the proof will be in the implementation.”
LAWYERS: THE “HONOR SYSTEM” DOES NOT WORK
The nonprofit advocacy group New Jersey Policy Perspective (NJPP), which has strongly criticized the NJEDA’s tax breaks, offered its take on the comptroller’s report.
In particular, the group said there was a big loophole that needed to be closed: the agency still allows companies to self-report job creation data “without independent oversight or audit.”
“This report shows that with billions of taxpayer dollars at stake, the honor system is not an appropriate oversight system,” said Sheila Reynertson, political analyst at the NJPP.
“Giving tax credits to businesses on the basis of the promise of ‘job creation’ only works if the state regularly checks that the jobs are actually created,” Reynertson said. “Unfortunately, no such verification system is in place. Instead, companies are being asked to report their own job data without effective oversight or independent auditing.”
“Accountability to the people of New Jersey shouldn’t be seen as an afterthought,” Reynertson said.
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