A bill approved by New Jersey’s Assembly would strike back against “corporate inversions,” when a U.S. company buys a smaller company abroad, then changes its address to slash its tax bill.
Under the measure approved Thursday, New Jersey would stop offering contracts and development subsidies to these artful tax dodgers operating in the Garden State.
“The purpose of the bill is not really to argue the merits or lack thereof of inversions,” said Assemblyman Troy Singleton, D-Burlington, who co-sponsored the bill, “but really, simply, to acknowledge that the state of New Jersey should not subsidize those companies that employ this tactic.”
Critics counter that the measure would stifle opportunities for businesses in New Jersey, causing them and the jobs they offer to move elsewhere.
This bill “might wind up costing New Jersey well-paying jobs and [it] could also make it harder to attract companies to the state by reinforcing New Jersey’s reputation as anti-business,” said Andrew Musick, director of taxation and economic development at the New Jersey Business and Industry Association.
The bill comes not long after news that pharmaceutical company Pfizer is planning to buy Allergan, based in Ireland, in a deal that could save Pfizer hundreds of millions of dollars in tax payments each year, making it the largest corporate inversion ever.
Assemblyman Declan O’Scanlon, R-Monmouth, said companies such as Pfizer, which employs thousands of workers in the Philadelphia region, would not look favorably on the bill.
“Pfizer is a big employer here and presumably we would want it to continue to be, even if it does go through an inversion. This bill says, ‘You’re gonna do an inversion, we really don’t want you here anymore’,” O’Scanlon said.
“Why on God’s green Earth would we want to send that message to any corporation?”
According to New Jersey Policy Perspective, a left-leaning think tank, corporate inversions harm the state in two ways — by reducing the availability of federal funding and by shrinking the amount New Jersey can collect in corporate taxes to fund education and health care.
“There’s no reason policymakers should be making New Jersey a three-time-loser from these schemes by awarding tax dodgers with additional state tax breaks,” said NJPP deputy director Jon Whiten.
The bill now goes to the full Senate for a vote.