A little more than three weeks ago, the New Jersey Legislature passed, and Gov. Phil Murphy signed the fiscal year 2026 state budget. Much of the attention on the budget focused on the historic $58.8 billion price tag for taxpayers — and the addition of $1.2 billion in new taxes. Here at Garden State Initiative, we also brought attention to the $700 million in “extra” spending that lawmakers quietly added to the budget and made public only three days before the budget vote on our new website — njbudget.com.
Beyond those headlines, less attention was paid to the impact of this year’s budget on New Jersey’s business community — and how that translates to every resident of the state. In simple terms, New Jersey’s increasing lack of economic competitiveness with our regional neighbors and the nation at large is immediate cause for concern.
New Jersey has nation’s top marginal corporate income tax rate
Currently, 44 states levy some kind of corporate income tax — with New Jersey’s top marginal rate of 11.5% being the nation’s highest. (The average top rate is 6.5%.) Pennsylvania, North Carolina, Nebraska and Louisiana lowered their rates this year while New Jersey was one of only two to increase our rate. It is worth noting the diverse political makeup of the states that decreased the corporate tax rate to underscore the point that pro-business policy is not a partisan issue.
Politics aside, let’s focus on the impact of this policy decision. In 2023, GSI released a report by Dr. Art Laffer exposing the burden of New Jersey’s corporate tax rate and comparing the positive impact of states that boosted their economies through tax reform. The report quantified the resulting increase in employment and revenue and recommended a significant draw-down, or ultimately, an elimination of the Corporate Business Tax, or CBT, over time for New Jersey.
Based on the most recent unemployment figures released by the Bureau of Labor Statistics, New Jersey would have greatly benefited from this recommendation.
Unfortunately, New Jersey’s unemployment rate of 4.9% is higher than New York’s (4.0%), Delaware’s (4.0%), Pennsylvania’s (4.0%), and Connecticut’s (3.8%). Nationally, we are in the bottom 10, with just three states and the District of Columbia having a worse unemployment rate.
Both inside and outside the state, employers and economists are taking notice of these employment figures. The private sector continues to see jobs flee the state, with nearly 30 companies including Bed Bath & Beyond, Prudential Financial, Novartis and Walmart all executing layoffs in 2024 or announcing plans to do so in 2025. The moves resulted in pink slips for thousands of New Jersey residents, or an offer to relocate with their company to a new state with more favorable conditions for employers and employees.
This month, Inc.com published the top 10 states with the highest layoff rates in relation to workforce size as of April and New Jersey was at the top of the list: New Jersey, with 1,843 layoffs per 100,000 workers.
In another national ranking, WalletHub recently ranked New Jersey as the third-worst place to do business in the United States, downgrading the state for small business growth, office space affordability, labor costs and cost of living for its residents.
Right here at home, the New Jersey Business and Industry Association, or NJBIA, rated the Garden State as dead last in cost competitiveness and business taxes in its annual Regional Business Climate Analysis. It was the seventh consecutive year the Garden State held that position.
New Jersey cannot sustain more misguided policy decisions
Last year, on these very pages, I penned an op-ed that took the state to task for its decision to renege on a deal to sunset what was supposed to be a temporary surcharge on businesses and bring it back with a new name. One year later, these rankings prove the seriousness of that misguided policy decision.
GSI has continued to recommend solutions aimed at restoring New Jersey’s competitiveness. With a new governor to be elected this November — and all 80 members of the state Assembly on the ballot — it’s worth repeating them:
- Lower the CBT over a two-to-five-year stretch to match the national average rate and consider eliminating it altogether in the years to come
- Repeal or reduce write-offs and special interest exemptions enjoyed by the favored few
- Eliminate future tax incentive programs – and truly create a level playing field for all companies
It’s time to stop accepting the status quo of being ranked the worst state for businesses — because businesses are employers, our largest taxpayers, our most charitable givers and are the building blocks of our economy.
Audrey Lane is the president of Garden State Initiative. Lane served as a government policy and strategic messaging professional on both the municipal and state level and served as an elected councilwoman in her home borough of Mountain Lakes. She is a graduate of Johns Hopkins University and was selected as a member of the American Enterprise Institute Leadership Network in 2021.
