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New Jersey Lawmakers Contemplate Multistate Incentives Truce

Posted on Aug. 19, 2019

Taking a cue from Kansas and Missouri, New Jersey lawmakers have indicated support for an economic development incentives truce with neighboring states.

After Louis DiPaolo of New Jersey Policy Perspective tweeted August 14 that the recent incentives border war truce signed by Kansas Gov. Laura Kelly (D) and Missouri Gov. Mike Parson (R) is "an incredible idea that should be replicated," New Jersey Senate Majority Leader Loretta Weinberg (D) chimed in, tweeting that the idea makes sense and is worth exploring for New Jersey.

The Kansas-Missouri agreement ends the use of state-level tax incentives to lure businesses over state lines in the Kansas City region — specifically in the counties of Cass, Clay, Jackson, and Platte in Missouri, and Johnson, Miami, and Wyandotte in Kansas.

According to DiPaolo's tweet, "If New Jersey entered a [similar] ceasefire with New York & Pennsylvania, all three states would benefit by ending this costly race to the bottom.”

New Jersey Sen. Troy Singleton (D) also responded to DiPaolo's tweet, saying the idea would be worth exploring if New Jersey Gov. Phil Murphy (D), Pennsylvania Gov. Tom Wolf (D), Delaware Gov. John Carney (D), and New York Gov. Andrew Cuomo (D) could come to a similar agreement.

New Jersey Sen. Joe Cryan (D) tweeted that he “couldn’t agree more” with what DiPaolo said.

However, Regina Egea, president of the conservative think tank Garden State Initiative, was skeptical that such a compact could work, pointing out that the Kansas-Missouri compact is regional. "I haven't seen anything that would indicate that [Kansas and Missouri] think there's enough commonality of interest that they would expand that to the state level," she told Tax Notes August 16.

Egea said she can't imagine why Cuomo or Wolf would support such a truce because they have more favorable tax environments for businesses. "As long as we insist on keeping our tax rates so high, we'll be required — just to level the playing field — to use incentives," she said. 

Spokespersons for Wolf, Carney, and Cuomo did not respond to requests for comment by press time.

During an August 15 press conference, Murphy said he was open to the idea, but added that it would need to include “more than the neighborhood.” He noted that the EU doesn’t allow countries to use tax incentives to compete with each other.

In a statement to Tax Notes, New Jersey Assembly Speaker Craig Coughlin (D) said, “Every state has the responsibility to spur economic growth and create long-term, well-paying jobs for their residents. Taking a closer look at the Missouri-Kansas initiative wouldn’t hurt. The concept definitely deserves further review.”

According to New Jersey Senate President Stephen Sweeney (D), a truce between New Jersey, New York, and Pennsylvania would “free up more incentive money for us to compete to bring jobs to our region, particularly cities like Paterson and Trenton that need help the most.”

Sweeney said New Jersey should put a tax incentive program in place and then “work together [with neighboring states] on long-term reforms — including a multistate tax credit cease-fire like the one that the governors of Kansas and Missouri just signed.”

New Jersey’s two major incentive programs — Grow New Jersey Assistance and the state and local Economic Redevelopment and Growth (ERG) grant program — recently expired. A task force established by Murphy is examining the programs after a January performance audit by State Comptroller Philip Degnan found major flaws with the New Jersey Economic Development Authority’s oversight and management of the programs.

The Legislature passed a bill on June 20 (S. 3901) to extend the general application deadlines for the programs from July 1, 2019, to January 31, 2020. Murphy has yet to act on the bill but has vowed to veto it.

If the governor does not sign the bill, “we’ve already unilaterally disarmed,” according to Sweeney.

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