NJ Newsroom: N.J. coalition against sending state subsidies to Goldman Sachs and other corporations

 New Jersey Newsroom

 

Andy Lagomarsino
April 21, 2010

 

Wednesday in Jersey City, the Better Choices for New Jersey Campaign held a press conference outlining the nearly $58 million in taxpayer dollars the state has provided to financial giant Goldman Sachs through the Business Employment Incentive Program (BEIP) and estimated that the state could pay as much as $18 million in additional subsidies this year. The Better Choices Campaign called for a suspension of BEIP for one year, a move they said would save the state an estimated $201 million in one of the toughest budget years in state history.
 
"Giving funds that could be used for property tax relief, to prevent transit fare or tuition hikes, or preserve vital services for working families to financial giants like Goldman Sachs and Merrill Lynch is unconscionable when working families are struggling under the weight of this recession," said Margarita Hernandez, Interim Executive Director of the New Jersey Working Families Alliance and coordinator of the Better Choices for New Jersey Campaign.
 
BEIP was spearheaded by the Whitman administration in 1996 and is administered by the New Jersey Economic Development Authority. The subsidy program offers cash grants to corporations that either relocate to or expand in New Jersey. The size of the grant is contingent on the number of jobs created or relocated into the state, and can be equal to anywhere from 10-80 percent of the income taxes withheld by the corporation for their employees.
 
Coalition spokespersons maintained that the flaws of BEIP are particularly noticeable in the case of Goldman Sachs, which has to date received funds from two different grants over a period stretching from 1997 to the present — for a total of $57,967,304 over the last twelve years.
 
In 2006 and 2007, the firm reported to Jersey City that only 8.6 percent of its 2,567 workers at 30 Hudson Street were local residents. A Goldman Sachs executive explained to the Jersey Journal in 2007 the relatively small number of local hires by saying that most of the 30 Hudson Street employees had been with the company in New York City. Goldman Sachs has been awarded four BEIP grant from New Jersey — but the firm has only received payouts from two of those grants. For these BEIPs, Goldman so far has received the highest possible percentage for a BEIP grant — 80 percent of the income taxes for those workers moved to or hired in New Jersey. For the 1997 grant, the average salary was $72,000 per year. For the second grant in 2000, the average salary was $216,000.
 
"Corporations like Goldman Sachs are happy to take state subsidies, but they already make such large profits that those subsidies make very little difference in how they make decisions. What really draws businesses to a particular location are the fundamentals like the quality of the workforce, strong universities and a robust transportation system. Jersey City's shoreline was already an attractive location to Goldman Sachs before they received BEIP grants or any other public inducements," said Sarah Stecker, Policy Analyst at New Jersey Policy Perspective, a nonpartisan organization that studies state issues.
 
The coalition also noted that Goldman Sachs receives separate subsidies from Jersey City through property tax abatements on its 30 Hudson Street and 50 Hudson Street properties, and as a result will not suffer from the expected increase in property taxes due to cuts to municipal aid. The company also received $10 billion in federal funds through the Troubled Asset Relief Program in 2008.
 
Tuesday, Goldman Sachs reported a 91 percent increase in quarterly earnings for a total of $3.46 billion.
 
Advocates contrasted these record profits with the economic crisis currently facing the state. Governor Christie's draconian FY 2011 budget attempts to close a multi-billion dollar deficit by deferring $848 million in property tax relief, cutting school aid by $821 million and municipal aid by $445 million, and by making deep cuts across the board to transit, higher education, affordable health care and libraries.
 
It also includes over a billion dollars in tax breaks for the rich and corporations by declining to renew FY 2009's rate increase on residents making over $400,000 per year and allowing the 4% surcharge on the Corporate Business Tax to expire.
 
Daniel Santo Pietro, Public Policy Chair for the Latino Action Network, described the impact of the proposed cuts on working families. "This is a brutal and regressive budget. For all his talk about shared sacrifice, Chris Christie seems to ask more of everyone except the rich and corporations like the one in the tower behind us," said Santo Pietro.
 
The Better Choices for New Jersey Campaign represents over 55 organizations and was formed in 2008 to fight for a fair share budget that invests in quality education, affordable health care, infrastructure and our environment. Many of its revenue proposals were adopted for the FY 2010 Budget.
 
This year Better Choices for New Jersey has unveiled a multi-tiered plan to raise $3 billion in additional revenue that could mitigate cuts that impact working families.
 
The first proposal would suspend the BEIP program to save an estimated $201 million in funding. The second would restore last year's rate increase on residents making over $400,000 per year to net $1 billion. The third would extend the current 4 percent surcharge on the corporate business tax set to expire in FY 2011 and raise it to 8 percent for an additional $160 million in funding.
 
The Better Choices revenue plan would also close corporate tax loopholes by reinstituting the throwout and regular place of business rules and implementing a plan of combined reporting for corporations and their subsidiaries.
 
Increasing registration fees on gas guzzling vans and SUVs that weigh over 5,000 lbs would net an estimated $140 million. Better Choices also supports bringing gas revenues more in line with surrounding states by implementing a ten cents per gallon gas tax increase for $450 million or a 7 percent sales tax on gas for $900 million.
 
In total, the Better Choices revenue plan would generate $3 billion in critically needed funds.
 
"Chris Christie may talk the talk about shared sacrifice, but our proposals walk the walk by asking corporations and the wealthy to pay their fair share instead of balancing the budget on the backs of working families," said Hernandez.