Latest Tax Expenditure Report Shows Clear Need for More Info on Business Tax Subsidies

New Jersey’s most recent Tax Expenditure Report released this week leaves a lot to be desired when it comes to accounting for the revenue being lost to the state’s business tax subsidy programs.

Let’s back up for a second. If you aren’t familiar with the Tax Expenditure Report, you’re not alone. It’s a relatively obscure – but important – annual report the Treasury produces that details the estimated amount of revenue lost to various tax deductions, rebates and credits.

Yet this year’s report fails to include a wide variety of tax expenditures for business tax breaks at a crucial time in which approvals of these subsidies is dramatically increasing. The report, for instance, includes no data on revenue lost to the $542 million in deals made under the Grow New Jersey program before 2013’s Economic Opportunity Act (EOA) went into effect. Likewise, it includes no data on revenue lost to the $857 million in deals made under the Economic Redevelopment and Growth (ERG) program prior to the EOA.

What’s worse, the Treasury’s report contradicts some numbers that the Economic Development Authority (EDA), which administers these business tax subsidies, has released. For example, the Tax Expenditure Report estimates that just $1 million will be lost to both programs under the Economic Opportunity Act in the 2016 budget year. EDA’s own projections point to a loss of at least $81 million.

Clearly, there is no clarity about how much money New Jersey is set to lose each year to its business tax subsidy programs. But a companion document to the Tax Expenditure Report could help shine more light on the situation.

The report in question is known as the Unified Economic Development Budget, and it is supposed to report on the outcomes of New Jersey’s business tax subsidy programs, detailing what companies had received subsidies, how many jobs they had created, how much the jobs paid, whether they had laid off workers at other sites and other measurements of the outcomes of the tax break. I say “supposed to” because although its annual production was made law by the same 2007 legislation that birthed the Tax Expenditure Report, the Treasury has never done this report.

Luckily, there is legislation moving through the State House that could finally force Treasury’s hand after years of delay. Regardless of the prospects of that bill, though, the message sent by the new Tax Expenditure Report is clear: New Jersey needs more and better information about the results of its business tax subsidy programs.