- New Jersey’s new law offers tax incentives to AI companies and data centres.
- The initiative diverts funds from other state programmes and aligns with Murphy’s “AI Moonshot” vision.
OUR TAKE
This initiative underscores New Jersey’s ambition to become a central player in the AI sector. By offering substantial tax credits, the state aims to attract high-profile AI firms and bolster its research and development capabilities. However, while the plan seeks to position New Jersey as a hub for AI, critics question its long-term economic impact, highlighting potential costs and the need for balanced benefits.
— Zoey Zhu, BTW reporter
What happened
Governor Phil Murphy signed a law on Thursday to offer up to $500 million in tax credits for AI companies setting up operations in New Jersey. This move is part of Murphy’s “AI Moonshot” vision, aiming to make the state a key player in AI research and development. The tax credits are available to AI companies and data centres operating at large scales in the state. The funds are being redirected from two existing state tax credit programmes initially set up for job creation and real estate development in response to the Covid-19 pandemic.
The plan has drawn mixed reactions. Critics worry that while it might benefit profitable AI firms, it could lead to a net fiscal loss for the state. Data centres often employ few people, and the overall cost-effectiveness of such tax incentives remains uncertain, according to an analysis by New Jersey’s Office of Legislative Services.
Also read: Wells Fargo appoints new tech head, embraces AI innovation
Also read: Nearly half of Japanese companies have no plan for AI use
Why it’s important
The tax credits are a significant part of New Jersey’s strategy to become a major hub for AI technology. By offering financial incentives, the state hopes to attract leading AI companies and data centres, potentially creating a surge in local industry growth and innovation. This could enhance New Jersey’s reputation in the tech sector and increase its competitiveness in the AI field.
However, the potential benefits of the tax incentives come with risks. Critics argue that the financial advantages for the state might be outweighed by the costs, given the limited employment opportunities provided by data centres. The state’s approach, which includes requirements for AI firms to support smaller businesses or universities, aims to address these concerns, but its effectiveness will depend on the broader economic impact over time.
The initiative also reflects a growing trend in the US to use tax incentives to attract tech companies, but New Jersey’s approach is noted for its strategic focus on AI and its potential to address latency issues by being closer to major business hubs.
