New Jersey quietly gives away billions in tax breaks — and nobody is watching

By James J. Devine

Nearly a decade after a Stockton University watchdog report warned that New Jersey’s tax expenditure reporting was a fiscal black hole, a new NJTODAY.NEWS analysis finds the state is still handing out billions in tax breaks while keeping the public in the dark about who benefits and whether the giveaways work.

The original brief, published in January 2017 by the William J. Hughes Center for Public Policy, found that New Jersey reported an estimated $23.5 billion in tax expenditures for fiscal year 2017 — roughly two-thirds the size of the annual state budget — while providing estimates for only 51% of authorized tax breaks.

Tax expenditures are provisions in the tax code that provide preferential treatment to certain individuals, activities, or organizations, effectively functioning as spending through the tax system rather than through direct appropriations.

Examples include the exclusion of Social Security income from state taxes and the sales tax exemption for clothing and footwear.

What has changed

The New Jersey Department of the Treasury has continued to publish annual Tax Expenditure Reports without interruption. The most recent report, covering fiscal years 2025 through 2027, was published in 2026.

The basic structure remains consistent with the format described in the 2017 brief, though the reliability rating system has been simplified from a 1-to-6 scale to a 1-to-4 scale, with 1 representing the most reliable data based on verified tax returns.

Individual line items in the report demonstrate significant growth since 2017:

• Social Security income exclusion: Projected at $1.62 billion for fiscal year 2025, rising to $2.39 billion for fiscal year 2027.
• Employer contributions to retirement plans: Projected at $1.79 billion for fiscal year 2025, increasing to $1.95 billion for fiscal year 2027. The 2017 report listed this item as “No Estimate Reported.”
• Gifts and inheritances: Projected at $635.6 million for fiscal year 2025, rising to $667.1 million for fiscal year 2027 — a more than fourfold increase from the $143.9 million reported in the 2017 brief.
• Pension exclusion: Projected at $424.6 million for fiscal year 2025, growing to $493.1 million for fiscal year 2027.

These increases reflect both the natural growth of existing tax expenditures and, in some cases, improved estimation methodologies that have brought previously unreported expenditures into the reporting framework.

The numbers nobody can see

The central criticism of the 2017 brief — that only about half of authorized tax expenditures had estimates — remains substantially valid.

The 2027 report shows that of 39 tax expenditure estimates with a reliability rating of 1, the highest level, 11 fall under the Corporation Business Tax, 24 under other taxes and four under the Gross Income Tax. None are under the Sales and Use Tax, which represents the largest single category of tax expenditures.

The 2027 report acknowledges the challenge, stating that while some estimates “can be calculated directly from information reported on tax returns, others by necessity must be derived from incomplete or aggregate data from tax returns, from other state government agencies or from external sources such as federal agencies and market studies.”

New giveaways, same old story

Since the original brief, New Jersey has created several new tax expenditures without adopting the oversight mechanisms the 2017 report recommended.

The Qualified Small Business Stock capital gains exclusion, enacted on June 30, 2025, conforms to federal rules under Section 1202 and takes effect for tax years beginning on or after Jan. 1, 2026. The 2027 Tax Expenditure Report projects a cost of $26.7 million for fiscal year 2027.

The Next New Jersey program, created in 2024, allowed companies engaged in artificial intelligence or data center development to reduce their state tax liability by as much as $250 million.

Its only recipient, CoreWeave, secured the maximum award for a planned $1.2 billion data center investment. By June 2026, lawmakers were moving to eliminate the program, with the Senate Budget and Appropriations Committee voting unanimously to sunset it.

Assemblymember Andrew Macurdy said at the time: “There’s a real question about whether that is the best use of taxpayer money in 2026.”

The episode illustrates a central criticism raised in the 2017 brief: “Once written into law, tax expenditures rarely disappear.” The Next New Jersey repeal demonstrates that swift action is possible when a tax expenditure attracts political scrutiny, but it also raises the question of why such review requires a dedicated legislative effort rather than occurring through a routine evaluation process.

Property tax relief: growing costs, growing questions

Significant developments have also occurred in property tax relief programs delivered through the tax system.

The Stay NJ program, enacted in 2023, provides a property tax credit to senior homeowners. By fiscal year 2026, the program was budgeted at $590.5 million, with a total appropriation of $600 million for the program’s launch.

The ANCHOR Property Tax Relief Program has grown to $2.39 billion in fiscal year 2025, though it declined slightly to $2.30 billion in fiscal year 2026.

New Jersey Policy Perspective has raised concerns that the Stay NJ program, if fully implemented, could cost approximately $1.7 billion, “all of which is unfunded,” and that its structure would “overwhelmingly go to the highest-income households and would widen the state’s racial wealth gap.”

Promises made, promises ignored

The 2017 brief offered six specific recommendations for improving the utility of the Tax Expenditure Report. An NJTODAY.NEWS assessment finds minimal to no progress on each:

1. Sunset provisions or periodic review cycles: Minimal progress. The 2017 brief noted that tax expenditures in New Jersey have no sunset provisions. Legislation introduced in 2014 that would have imposed a seven-year limitation on new tax expenditures was not enacted.
2. Formal review process involving more than the Executive branch: No apparent progress. The 2017 brief found that New Jersey “does not have a formal feedback process.” There is no indication this has changed.
3. In-depth annual reviews of portions of tax expenditures: No evidence of systematic implementation.
4. Clarifying policy objectives: Some improvement. The current report includes a statement of objectives for each expenditure, though these are largely descriptive rather than evaluative.
5. Clarifying data collection responsibilities: Unchanged. The 2027 report still includes numerous “No Estimate Reported” entries, particularly in the Sales and Use Tax category.
6. Requiring new tax expenditure legislation to contain clear policy objectives: No evidence of systematic implementation.

A national embarrassment

A 2024 report from the Volcker Alliance and the Tax Expenditures Lab examined tax expenditure oversight in six states, including New Jersey. The report’s recommendations echoed those of the 2017 brief: clearly delineate the reasons for major tax expenditures, create performance indicators to evaluate them and set standard sunsetting provisions.

The persistence of these recommendations across multiple reports over nearly a decade suggests they have not been meaningfully implemented in New Jersey.

The bottom line

The 2017 brief concluded with a warning: “Like an iceberg, a significant amount of the tax expenditure picture remains invisible.”

Nearly a decade later, that metaphor still applies. The Tax Expenditure Report has become more complete, and some previously unestimated expenditures now have dollar figures attached. But the fundamental problems identified in 2017 — incomplete data, lack of systematic review, absence of sunset provisions and the persistence of tax expenditures once enacted — remain largely unaddressed.

The fundamental question posed in 2017 — whether the Tax Expenditure Report is “sufficiently useful to meet the statutory intent of the legislation that created it” — remains difficult to answer in the affirmative.