Topic Category: Tax and Budget

Film Tax Credit Expansion is a Bad Deal for New Jersey

Posted on by Peter Chen

Today the Assembly and Senate budget committees approved yet another expansion to the film and television tax credit program, making it easier for companies to receive credits and allowing film production studios to claim Pennsylvania workers as New Jersey film expenses. Despite overwhelming evidence that film tax credit programs offer pennies on the dollar in benefits for their costs to the state, this bill further loosens the strings on these credits. In response to this proposed legislation, New Jersey Policy Perspective and the American Economic Liberties Project issue the following statement.

Pat Garofalo, State and Local Policy Director, American Economic Liberties Project:

“The proposed changes to New Jersey’s expensive and wasteful film tax credit program make a bad deal even worse. Many of the film production jobs already go to transient workers from out-of-state. Now, this bill would let production companies claim out-of-state Pennsylvania workers — who pay Pennsylvania income taxes — as though they were New Jersey workers, further blunting any economic benefit to the state.”

Peter Chen, Senior Policy Analyst, NJPP:

“Diverting tax credits focused on affordable housing to profitable film production studios undermines their original intent and minimizes the public benefits. As each year passes, the film tax credit program continues to be a bad investment for New Jersey.”

For more information on the shortcomings of New Jersey’s film tax credit program, see NJPP and AELP’s joint analysis on film tax credit expansions.

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Rushed AI Tax Credit Bill Has High Cost, Few Safeguards

Posted on by Peter Chen

Today the legislative budget committees advanced a brand new $500 million tax credit package (A4558/S3432) for artificial intelligence (AI) businesses. These credits would not be required to go towards businesses in economically distressed areas nor would they include more than minimal safeguards against the substantial environmental costs associated with running AI systems. In response to the fast-tracked legislation advancing through committee, New Jersey Policy Perspective (NJPP) issues the following statement.

Peter Chen, Senior Policy Analyst, NJPP:

“Any program that costs this much should be carefully considered before it’s voted on, especially when we’re talking about subsidizing a new industry with major red flags. Artificial intelligence raises serious ethical and environmental concerns, and there’s little to no evidence that this field will create long-term jobs or economic growth for the state. This bill lacks safeguards to ensure it actually benefits New Jersey residents, and this rushed legislative process shuts down any chance to debate or even discuss the merits of the program.

“With the state facing a structural deficit, now is not the time to use public dollars to subsidize private profits in the tech industry.”

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New Corporate Transit Fee is a Historic Win for Riders

Posted on by Alex Ambrose

Today, New Jersey lawmakers introduced and advanced legislation (A4704/S3513) that creates a Corporate Transit Fee and dedicates the proceeds to NJ Transit. Sponsored by Senate President Nick Scutari and Assemblywoman Shama Haider, the legislation establishes the first-ever dedicated funding for NJ Transit in the 45-year history of the agency. The 2.5 percent fee on corporations with more than $10 million in profits would primarily be paid by large multinational corporations headquartered out of state. This follows months of education and advocacy from transit riders, unions, local elected officials, and advocates for a fair budget and reliable transit. In response to the bill advancing, New Jersey Policy Perspective (NJPP) issues the following statement.

Alex Ambrose, Policy Analyst, NJPP:

“This is a historic win for riders and the state of New Jersey as a whole. Until now, NJ Transit has never had a dedicated source of funding, and the new fee will help get the agency back on track after decades of disinvestment. For riders, more funding means more reliable service, and fewer delays and cancellations, and no major service cuts.

“No matter how you look at it, this is the textbook definition of good public policy. The state is making a major investment in a public service that millions of people use, with broad economic benefits, and it’s paid for by profitable corporations that can afford it. With riders about to pay higher fares, this fee makes sure that multinational companies like Amazon are also paying for the infrastructure they benefit from.”

“There are countless advocates, riders, local officials, labor leaders, and lawmakers past and present who made this possible. Thank you to Governor Murphy, legislative leadership, and bill sponsors for taking this historic step towards a more sustainable economic future.”

Read NJPP’s report on the need for dedicated funding for NJ Transit.

Read NJPP’s analysis detailing how most companies that would pay the Corporate Transit Fee are headquartered out-of-state.

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For The Many NJ: Lack of Budget Transparency is Unacceptable

Posted on by NJPP Staff

Later tonight, New Jersey lawmakers will vote on a $58 billion state budget without having even read the several-hundred-page bill. Year after year, the budget committees vote on the state’s multi-billion dollar spending plan based on only a rough outline of what is included.

Tonight’s vote comes days after dozens of democracy, good governance, and fair budget organizations called on state lawmakers to end the annual backroom deals and last-minute scramble to write the state budget bill. New Jersey residents deserve a say in how the money is spent before a rushed vote at the eleventh hour.

“This lack of transparency is unacceptable and only serves to benefit powerful special interests with lobbyists and influence,” said Eric Benson, Campaign Director of For The Many NJ, a broad-based coalition of more than 40 organizations. “The budget touches the lives of every single person in the state, and members of the public should have at least 72 hours to review the budget before it is passed. Yet under the current system, the lawmakers themselves don’t even have 72 minutes to read it. Some lawmakers may think this is all normal and appropriate, but other states do not operate this way and the people of New Jersey deserve better. We demand a budget process that is transparent and accountable to the people it serves.”

Groups from across the political spectrum have long supported budget transparency and improved accountability. The hectic last-minute rush, often followed by clean-up bills to correct drafting errors, creates problems for all stakeholders who depend on the state budget. It also creates opportunities for lobbyists and special interest groups to sneak in changes at the last minute without scrutiny.

Last year, policy experts from New Jersey Policy Perspective (NJPP) called for new reforms to end the annual brinkmanship: A requirement that the budget bills be posted no later than June 1; a 14-day window between when the budget bill is posted and its second reading in committee; and multi-year projections for revenues and expenditures to reduce reliance on one-off gimmicks and allow for better long-term planning.

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For The Many NJ is a statewide coalition of more than 40 organizations working to expand funding for essential services and improve budget practices to meet current and future needs, especially for communities that have been historically left behind.

Benefits to Allocating Tax Credits for Artificial Intelligence Are Risky and Unclear

Posted on by Peter Chen

Allocating $500 million in tax credits in untested technology like artificial intelligence should give the state pause. Business tax credits should be used sparingly when subsidizing private profits, yet this proposal has almost no guard rails that ensure that these investments are responsible or sustainable, nor does it require that the jobs created be based in economically distressed communities.

One major concern is the redirecting of Aspire and Emerge credits to an unrelated purpose. Aspire and Emerge focus on revitalizing economically distressed areas with transit-oriented development and job creation. The new AI program would use those potential funds instead on promoting a narrow and risky subsector employing relatively few people. Without the commitment to economically distressed municipalities, it’s likely that AI tax credits would end up in already-wealthy communities and business owner pockets, rather than in the communities most in need.

AI data centers are also notorious for being extremely energy-intensive, with the International Energy Agency estimating that data centers and artificial intelligence will use as much energy as the entire country of Japan by 2026. As a state committed to reducing greenhouse emissions and increasing energy efficiency, New Jersey would be wise to put safeguards in place to prevent an increase in emissions at a time when the state can scarcely meet its current emissions reduction goals.

There may be a sense that because these credits come from unexpended Aspire and Emerge allocations that they are “free money.” But make no mistake, if a tax credit is handed out, the check will come due. The state has already seen the result of these credits in prior years with revenue reductions in the current tax year, as OLS detailed in its revenue report.

A $500 million tax credit to subsidize a risky investment deserves careful consideration, not a vague last-minute proposal with a mere sketch of guardrails and unclear benefits to the state.

NJPP urges the committee to pause this proposal for a robust debate rather than rubber-stamp it.

Dozens of Democracy and Fair Budget Organizations Demand Budget Transparency, Public Input on Closed-Door Process

Posted on by NJPP Staff

The We the People Coalition and the For the Many NJ, each representing more than 50 organizations across the state, called on state lawmakers to end the annual backroom deals and last-minute scramble to write the state budget bill. With a $58 billion budget touching on every public investment from schools and hospitals to public transit and environmental protection, New Jersey residents deserve a say in how the money is spent before a rushed vote at the eleventh hour.

With only 6 days remaining before the constitutional budget deadline on June 30, the groups called for disclosure of the budget bill text at least 72 hours before a budget committee vote at a public hearing with testimony, giving the public (and the legislators themselves) time to analyze the several-hundred-page bill before it is voted on.

“With erosions in public accountability after the changes to election contributions and now public records, this state cannot withstand even more backroom dealing without public accountability,” said Antoinette Miles, New Jersey Director of Working Families Alliance. “We must replace a system that benefits political insiders with an open process that includes the voices of communities that this budget is supposed to serve.”

“When lawmakers can spend billions of taxpayer dollars through a totally opaque process, that only benefits special interests with influence and access,” said Peter Chen, Senior Policy Analyst at New Jersey Policy Perspective (NJPP). “Budgets are moral documents, and a budget written and voted on in secrecy without public input will not reflect the values of the public.”

Last year, New Jersey Policy Perspective called for new reforms to end the annual brinkmanship: A requirement that the budget bills be posted no later than June 1; a 14-day window between when the budget bill is posted and its second reading in committee; and multi-year projections for revenues and expenditures to reduce reliance on one-off gimmicks and allow for better long-term planning.

“We have seen how procrastinated budget bills lead to votes with little to no public feedback and the legislators voting on bills they have not even seen,” said Jesse Burns, Executive Director, League of Women Voters of New Jersey. “If we believe in a robust democracy, that has to include meaningful public feedback on the biggest single bill of the year. The people of this state deserve better and are sick and tired of Trenton’s anti-transparency antics.”

“The opaque budget process has helped entrenched special interests instead of the working-class and middle-class New Jersey residents who form the foundation of the state,” said Nedia Morsy, Make the Road NJ. “The budget is a moral document that directly impacts immigrant and working class people. When transparency is upheld to keep working class people engaged we all benefit.”

“The public has every right to shape how public dollars are spent. The Legislature must make the state budget proposal public at least 72 hours before a vote is held and hold a hearing to take feedback from the public on the proposal. It’s one of many ways the Legislature can restore meaningful public participation in the budget making process,” said Dena Mottola Jaborska, Executive Director, New Jersey Citizen Action.

“With just a week to go, the Legislature has yet to give any indication of where it is in the budget process. New Jersey schools continue to be saddled with draconian cuts to their budgets, so districts need to know what funding they will have as soon as possible. We deserve to have a budget process that is efficient and transparent, just as our children deserve a ‘thorough and efficient’ education as guaranteed in New Jersey’s state constitution,” said Julie Larrea Borst, Executive Director, Save Our Schools NJ (SOSNJ).

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For The Many NJ is a statewide coalition of more than 40 organizations working to expand funding for essential services and improve budget practices to meet current and future needs, especially for communities that have been historically left behind.

We The People NJ is a statewide coalition of over a dozen labor, advocacy, and grassroots groups dedicated to advancing an equitable and more inclusive democracy by engaging and empowering underrepresented communities and building sustainable power among all New Jerseyans. wethepeoplenj.org

How StayNJ is Even More Regressive Than at First Glance

Posted on by Peter Chen

At first glance, StayNJ sounds like a promising initiative to help New Jersey’s senior homeowners stay in their homes. Who wouldn’t want to “cut property taxes in half for seniors”? However, the new property tax credit program disproportionately benefits the state’s wealthiest homeowners, an issue made worse by an overlooked flaw in StayNJ’s design: how it interacts with New Jersey’s two other major property tax credit programs.

In addition to the program’s high income cap of $500,000, higher benefits for more expensive homes, and the exclusion of renters, the regressive structure of StayNJ is compounded by how it interacts with ANCHOR and the Senior Freeze, resulting in even larger payments going to the highest-income households rather than the lower-income homeowners and renters who are most likely to be housing insecure.

As the newly released StayNJ Task Force Report details, the maximum property tax credit of the StayNJ, ANCHOR, and Senior Freeze programs combined is capped at half of one’s property tax bill, up to $6,500. Because the income eligibility for StayNJ ($500,000) is much higher than that of ANCHOR ($250,000) and the Senior Freeze ($150,000), the combined cap results in households having their ANCHOR and Senior Freeze benefits subtracted from their StayNJ benefit. Meanwhile, households with more than $250,000 in income would receive the full credit.

To illustrate how this works in practice, the case study below identifies how the combined cap would determine the property tax credit benefits for three hypothetical households: the Trentons, Hamiltons, and Princetons.

The Hamiltons and the Princetons, two households paying the same property tax bill but with vastly different incomes, would get different tax credit amounts from StayNJ because the program counts the Hamilton’s ANCHOR benefit against their StayNJ benefit. The higher-income Princetons would get nearly a quarter more in StayNJ benefits than the Hamiltons due to their higher income and ineligibility for ANCHOR.

The even lower-income Trentons would get dramatically less from StayNJ, both because of their lower property tax bill and the property tax credits they receive under ANCHOR and the Senior Freeze. In this scenario, the lowest-income homeowner would get nearly nine times less from StayNJ than the highest-income household, and roughly half of the total property tax credit amount from the three programs combined, with the Trentons receiving $3,500 total and the Princetons receiving $6,500 in total.

Take these examples and apply them across the state and one can see the bigger problem. Using the already regressive structure of StayNJ and subtracting out benefits from ANCHOR and the Senior Freeze results in an even more regressive program, where households with incomes higher than $250,000 receive the largest StayNJ benefits by virtue of earning too much to qualify for the state’s other property tax credits.

In a program as complex and costly as StayNJ, details matter, and the layering of StayNJ with other property tax credits tilts the tax code even more in favor of the state’s wealthiest homeowners at the expense of everyone else.

For more information on the shortcomings of StayNJ for low-income seniors and renters, see NJPP’s analysis of the program and testimony to the StayNJ Task Force.

Handouts to Horse Racing Industry Do Little to Benefit Working New Jerseyans

Posted on by Peter Chen

The state of New Jersey should not be in the business of subsidizing horse racing at all, let alone at a level of $20 million a year. Horse racing is not a public service, a benefit to the public at large, or frankly a benefit at all. It is, rather, a private multi-billion dollar industry, whose profits go largely to the pockets of executives and investors, not everyday New Jerseyans.

Nationally, purse amounts are substantially above pre-pandemic trend with average purse amounts at an all-time record high. Meanwhile gaming revenues and profits continue to increase. Again, it is unclear why these subsidies are needed or justified, nor whether they were needed at all in the first place.

At a time when everyday New Jerseyans continue to struggle with affordability and with the state running a structural deficit and burning through its surplus, handing $100 million to further prop up the horse racing industry puts state dollars where they are least needed.

I urge you to vote no on this bill.

Tax Credit Awards Should Benefit Communities, Not Just Developers and Landowners

Posted on by Peter Chen

Any changes that loosen requirements for developers and landowners when it comes to redevelopment tax credits should be carefully scrutinized, as stringent requirements are necessary to ensure that tax credit awards represent a true benefit to their communities rather than mere tax giveaways. It’s unclear why changes are necessary to Aspire given that the legislature amended the program last year and the EDA has just begun awarding credits based on the regulations updated to those legislative changes.

A few items of concern in the current bill:

  1. Removal of the three-bedroom apartment requirement: New Jersey rental housing remains scarce especially for affordable family units. The replacement of the three-bedroom requirement with a mere 5 percent increase in project cost for three-bedroom inclusion does not change the economic incentives for developers, who can obtain much more rent per square foot from non-family units. Requiring family housing should be part of affordable housing policy broadly.
  2. Use of credits for warehousing: Even with the addition of a $10 million environmental remediation requirement, warehousing should not be the focus of the Aspire program. As warehousing expands its footprint across the state, it’s unclear why warehouses need any incentives to build, even if substantial environmental remediation costs exist.
  3. Inclusion of parking in total square footage: The purpose of a transformative project is to improve communities with dramatic changes in residential or commercial space. New Jersey should not be subsidizing housing for cars at the expense of housing for people.
  4. Reduction in retail space: Reducing the requirement from 50,000 to 20,000 square feet of commercial space is a dramatic shift with no explanation. Again, defining “transformative” downwards is not clearly benefiting communities that have faced underinvestment for years.
  5. Redevelopment Bridge Program within EDA: Although a bridge financing program may be a good policy in order to assist in building the necessary finance stack for construction, NJPP has concerns about the EDA issuing loans and loan guarantees through the bridge program as well as the credits against which the loans are guaranteed. This creates a potential conflict.
  6. Carry-forward and transfer concerns: Extending the time window for redemption does increase the value of the credits, but each change in the time window for redemption also results in erosion of the predictability of credit claims. As seen in this year’s budget, tax credits from years earlier can come back to bite state revenue in a future year, making it more difficult to estimate revenues.

NJPP urges the committee to revisit and revise this legislation to address some of these concerns and also to pump the brakes on wholesale changes to the Aspire program this soon after previous changes.

Film Tax Credits Are a Bad Deal for New Jersey, With Few Benefits Coming Back to the State

Posted on by Peter Chen

Film tax credits have long been a bad deal for states, yielding pennies on the dollar while leaving Hollywood studios the lion’s share of the benefits. The current bill would loosen requirements on these credits even further, weakening the case of their supposed economic benefits to New Jersey.

One main concern is the treatment of Pennsylvania workers as New Jersey workers for the purposes of defining qualified production expenses. Why should the state be subsidizing workers from other states who pay income elsewhere? If a film production uses out-of-state labor, that’s certainly a choice they can make, but it’s unclear why New Jersey would allow companies to count those workers towards their economic costs accrued in-state.

Another is the rollover of Aspire and Emerge credits into the film tax credit program. Aspire and Emerge each have requirements on projects that limit credits to deserving programs that can serve to revitalize underinvested communities. This bill allows unused tax credits from Aspire and Emerge to simply be made available through this program to a wider range of potential claimants and raises the cap to $300 million. Given the long-term financial cost of tax credits on the state budget, the state should think twice before expanding access to tax credits without stringent requirements on ensuring benefits go to communities, not big corporations.

Given the dire economic straits the state budget finds itself in, it may be tempting to view the film tax credit program as free money, which can be doled out without appropriation and without budgetary cost. But this is purely an illusion; loosening requirements on tax credit programs means money going out the door with fewer benefits coming back to the state.

NJPP urges the committee to vote no on this legislation.

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