Corporate tax breaks designed to jolt New Jersey’s economy out of a post-recession slump risk stripping $1 billion a year in revenue from the state budget by 2020, according to the state’s economic-development agency.

This year, the state could lose out on $545 million from grants and tax-credit awards, according to an April memo reviewed by The Wall Street Journal from the New Jersey Economic Development Authority. Without the tax credits, the state’s corporate-tax-revenue growth would be 12% higher, Treasurer Elizabeth Muoio...