The continued expansion of corporate tax credits to induce economic development has yet to fully deliver on its promise. And yet, this bill proposes to send good money after bad, authorizing billions of state tax dollars to go towards private businesses and billionaires.
To be clear, the word “tax credit” is simply another word for subsidy – state tax dollars will go to pay for the development of real estate projects that benefit primarily private corporations and individuals, with the goal of creating long-term economic growth. Independent economic analysis from right, left and center have routinely cast doubt on the effectiveness of these credits.
Expanding the overall cap on credits by $3 billion has no justification.
The bill as written would expand the maximum total value of credits to $14.3 billion from the current cap of $11.5 billion. Basic questions remain unanswered such as why this increase is needed, given that credits remain unused in many years, and why such a dramatic increase does not include any additional safeguards on expenditures. Additionally, it’s unclear how this funding would all be used in the years remaining on the initial nine-year authorization.
There is no clear need for the sports and entertainment project described in the bill.
The renovation of a sports arena in a first-class city operating for 15 years with a seating capacity of 15,000 individuals applies only to one facility – the Prudential Center in Newark. The arena itself is less than 20 years old, and its entire initial cost was $375 million. Why less than two decades later it requires more than half as much to renovate as it did to build from scratch is a mystery.
In addition, sports stadiums and arenas remain among the worst possible investments for cities and states looking to increase economic activity. In state after state, and study after study, arenas produce pennies on the dollar, while saddling communities with white elephant buildings at the mercy of billionaire sports owners.
Although the requirements in the proposed bill admirably attempt to extract community benefits, at core these projects should not be the recipient of state tax dollars, given their woeful history.
As the state faces a shaky fiscal future, now is not the time to hand out more subsidies to billionaires and big corporations.
