Lawmaker Says Tax Credit Incentive a Good Move in Bad Economy
RUTHERFORD – Citing the faltering national economy and fiscal uncertainties here at home, Senator Paul A. Sarlo announced today at the opening of the Bergen County Film Festival at the Williams Center for the Arts in Rutherford that he would renew his push for a bill he sponsored last session which would offer tax credit incentives to digital media production companies seeking to relocate to New Jersey. A scaled-back version of the bill was signed into law in January after Governor Corzine expressed concerns.
“With Wall Street in crisis and New Jersey reeling from a national recession, now’s the right time to talk about encouraging economic growth and private investment in the Garden State,” said Senator Sarlo, D-Wood-Ridge. “At a time when we need to be seeking ways to grow our State’s economy, an incentive program for a booming high-tech industry makes sense. In the next few weeks, I will renew the push for the digital media tax credit to keep New Jersey economically competitive and at the cutting edge of today’s high-tech marketplace.”
Digital media production refers to the growing industry surrounding electronically-produced audio and video effects which have been incorporated in existing and new entertainment mediums, including computer-generated graphics for film or television, digital animation, computer-synthesized music, and character and environment rendering which makes many next generation video games possible.
Senator Sarlo’s bill during the 2006-2007 legislative session, S-2526, originally would have provided $30 million in State funds to pay for tax credits to digital media production companies relocating in the State. The program was patterned after the State’s successful film production tax credit initiative, which has served as an incentive for film and television projects to invest in New Jersey’s economy. While the bill was approved by the State Legislature with the original $30 million appropriation intact, the final appropriation amount was reduced to $15 million after the Governor issued a conditional veto, expressing concerns about the cost. The bill was also amended to make eligibility qualifications more stringent, shrinking the eligibility pool for companies who could receive the credit.
“When the bill was passed, I think the Governor was – rightfully – more concerned with the poor condition of our State budget than investing in our economy,” said Senator Sarlo. “However, with the economy being what it is today, I think New Jersey needs to be pro-active, not cautious, in promoting economic growth in the Garden State. An aggressive digital media tax incentive program will create high-paying jobs and encourage investment in New Jersey’s struggling economy.”
Senator Sarlo pointed to a study issued by global business analysts Ernst and Young, who projected that, in its original form, S-2526 would have generated, in the first five years after becoming law:
• More than 4,350 new high-wage jobs;
• In excess of $311 million in new wages for New Jersey residents;
• Almost $1 billion dollars of total economic output by businesses relocating and expanding in New Jersey.
Senator Sarlo noted that his bill would have also generated enough tax revenues for New Jersey and local governments that it would have made the program self-sustaining in a relatively short amount of time. For example, the Ernst and Young report projected that in the fifth year of the program, total tax revenues would have exceeded the amount of credits by almost sixteen million dollars, for a total of $46 million in new tax revenues for the State and local governments.
“With a modest investment, New Jersey could have reaped massive rewards from the digital media tax credit program,” said Senator Sarlo. “As we continue to monitor the crisis in our national financial sector and look to ways to bolster New Jersey’s economic picture, we need to adapt to trends in the New Economy and promote the Garden State as friendly to high-tech, high-growth industries. An aggressive digital media tax credit program is the right medicine for our State’s ailing economy, and will keep New Jersey at the technological and economic forefront for many years to come.”
The bill was signed into law on January 8 of this year, at the close of the 2006-2007 legislative session.