NJ must let tax surcharge expire as planned
Christina M. Renna and Audrey Lane For The Press | April 27, 2023 | As Seen In https://pressofatlanticcity.com/
New Jersey’s business community is counting on the legislature and Governor Murphy to keep their word when it comes to corporate taxes. To resolve contentious budget negotiations in 2018, Governor Murphy, Speaker Coughlin, and then-Senate President Sweeney agreed to a temporary, four-year increase in the state’s Corporate Business Tax (CBT), imposing a surcharge on all companies earning more than $1 million per year. The surcharge increased the 9 percent rate by 2.5 percent in the first two years, with the intent of being phased out over 2 years, by 2021. At 11.5 percent, New Jersey’s CBT ranked as the highest in the nation, with no other state in double-digits. Citing fiscal uncertainty when the COVID-19 pandemic struck in 2020, the Governor and legislative leaders shelved the original plan to sunset the temporary surcharge at the end of 2020 and instead extended the surcharge to the 2024 Fiscal Year, which begins July 1. It is no secret the last few years have been extremely difficult for business owners in New Jersey. Beyond the COVID-era restrictions and tax increases to replenish the Unemployment Trust Fund, ask any Garden State business owner and they can tick off a litany of new regulations enacted in recent years to make operating in our state more difficult. In his February Budget Address, Governor Murphy called for the temporary CBT surcharge to be allowed to sunset as scheduled. He said the state should “keep our word” so that business owners can “create jobs, to invest in new and more efficient equipment, to lower costs to consumers, and to be able to stay here.” In a tacit admission that high taxes do matter, the Governor added that sunsetting the temporary surcharge will help the state “compete for the world’s leading companies and make New Jersey the place where entrepreneurs will want to come to start new ones.”
However, when asked if they supported the scheduled sunsetting of the surcharge at a recent event, current Senate President Scutari and Assembly Speaker Coughlin did not provide a definitive voice of support. Their reluctance was a surprise to business leaders who have paid their fair share and have planned their forecasting and cash flow assuming the legislators would stay true to their word and allow the surcharge to sunset as scheduled at the end of this year.
What does this matter to the average New Jerseyan? A recent research report from the Garden State Initiative (GSI) lays bare the consequences of Trenton’s policy decisions. Over the last quarter century, New Jersey’s high business taxes have led to an outmigration of businesses, and loss of income to other states along with a stagnant economy and population relative to the U.S. During that time, New Jersey lost over $46 billion in income to other states. That means a weaker economy and higher taxes for those who remain.
Other states that have worked to improve their business climate have seen dramatic results. While dozens of states, Red and Blue alike, have undertaken significant tax reform in recent years, New Jersey has remained an outlier. As detailed in the GSI report there is ample evidence that corporate tax cuts coupled with other reforms, more than pay for themselves and return more jobs and higher incomes to average state residents. A failure to allow the temporary surcharge to sunset will send a clear and negative message to New Jersey business owners and be noticed by anyone thinking of starting or relocating a business in our state. If our elected leaders are serious about building a stronger economy that benefits all New Jerseyans, they need to keep their word to our business community.
Christina M. Renna, of Mount Laurel, is president and CEO of the Chamber of Commerce Southern New Jersey. Email her at email@example.com. Audrey Lane, of Mountain Lakes, is the policy director of the Garden State Initiative. Email her at firstname.lastname@example.org.