If Amazon decides to locate the headquarters in Newark — with the city among those short-listed for the project — it would bode an economic windfall for Newark, at a minimum. But Bracken figures that even if Newark isn’t selected, the $5 billion in tax incentives New Jersey has offered in wooing Amazon should be diverted to programs boosting the state business community in other ways.
Bracken told NJBIZ the state Economic Development Authority and other agencies would be well-advised to use the money to incentivize the approximately 350,000 businesses already operating in the state.
“Amazon will help Newark — that’s it,” Bracken argued. “Beyond that, the economic impact will be minimal. ... It would be wonderful if we got Amazon, but I’m not a fan of putting all of our eggs in one basket, especially if it chokes off all of the other companies in New Jersey. If we get it, great. But if we don’t get it, take that $5 billion in tax incentives and give it to the masses.”
Bracken said that the state needs to “play defense” with its tax incentives in order to keep companies from exiting the state.
“Offensively, we pay five times more in tax incentives to bring new businesses here than any other state,” he said. “Companies that are already in New Jersey — businesses both big and small that have been here for several generations — have been starving for that money. If you do that, you’re going to have economic growth that far exceeds anything that Amazon would have done with that $5 billion.”
It’s worth noting that Newark has pledged an additional $2 billion in local tax credits, making for a $7 billion incentives package. On its end, Amazon estimates it will spend at least $5 billion locally in building out its new second headquarters.
Newark is the only city in New Jersey among the 20 that made Amazon’s shortened list of contenders at the beginning of the year.
On other subjects in a far-ranging interview with NJBIZ, Bracken criticized the recently enacted U.S. Tax Cuts and Jobs Act, saying it will hurt most New Jerseyans. But the chamber chief added he was encouraged by the earliest recommendations made by a state tax reform committee created by state Senate Majority Leader Stephen Sweeney, D-3rd District, and Deputy Majority Leader Paul Sarlo, D-36th District.
The federal tax reforms, he said, will have onerous effects on homeowners and retirees.
“People have said to me, ‘How can you say that this tax reform is bad? I just got my first paycheck and I took home more money?’ Some people are going to win, and I’m very happy for any person or any company that gets more money,” Bracken said. “But talk to me next year after you file your income tax, and after you file, net it out, tell me if you still won. If you did win, I’m all for it. But many more people in New Jersey are going to be net losers.
“New Jersey, more than any other state in the country except for the other three states, is being penalized by this tax law. … We can’t stand the fact that once again we have to add to the donation to other states. It makes no sense to me.”
Among sundry other problems, Bracken said the federal tax reforms make it impossible for utility companies to write off accelerated depreciation of assets.
“There are all these little nuances in this bill that nobody’s even gotten to yet, because it’s 430 pages long and many of the changes are handwritten in the margins,” he said. “So we still have more to come on the unintended consequences of this.”
People close to retirement could be hit the hardest by tax reform, said Bracken, because the $10,000 cap on property tax deductions will cause real estate values to go down.
“For the homeowners of New Jersey, because we’re a high real estate value and high real estate tax state, the values of properties are going to go down. I don’t care what anybody says,” he said. “A lot of people here rely on the equity of their homes for retirement. Right now if they lose 10 percent of their house value, they’ve lost 10 percent of their retirement income, and that’s not good. Now, you layer on to that what’s going on in the stock market with 401(k)s. Everyone who was fat and happy with their 401(k)s a month ago are now saying, ‘I’m going to have to work forever. I can’t retire.’”
Bracken said that he is encouraged by a tax-reform package introduced by the state tax-reform committee, though the package does include a heavily criticized surcharge on C-corporations.
Turning to education issues, Bracken urged reforms in the way public school districts are composed and funded.
“The real cost in property taxes is school funding,” he said. “We have 560 municipalities and 610 school districts, and every one of them has its own fiefdom costs associated with it. Getting the ability to consolidate would be the real key in addition to the overhang of health care costs.”
And on the issue of raising the minimum wage for all workers in New Jersey? Bracken is against raising it to $15 per hour as proposed by Gov. Phil Murphy — unless increases are staged in careful increments.