Examining New Jersey’s Corporate Tax Landscape
In the ongoing debate about corporate taxes in New Jersey, a recent opinion piece by New Jersey Policy Perspective Senior Policy Analyst Peter Chen has sparked discussion on the tax contributions of the state’s largest employers. The narrative often leans towards corporations needing to pay their “fair share,” yet this perspective may lack a comprehensive view of the actual figures and comparisons with other states.
Research from the Council on State Taxation (COST) reveals that New Jersey businesses shouldered a hefty $34.1 billion in state and local taxes in FY22. This accounts for 45.3% of the total state tax burden, surpassing the national average where businesses cover approximately 40%. With New Jersey boasting the highest corporate tax rate and property taxes nationwide, claims of tax avoidance seem to miss the mark.
Competitiveness is a crucial factor when considering New Jersey’s tax policies. Prior to the expiration of a temporary 2.5% Corporation Business Tax surtax, the state’s top corporate business tax stood at an unprecedented 11.5%. Governor Phil Murphy had acknowledged the necessity for competitive tax rates to retain jobs within the state. However, his recent proposal for a permanent 2.5% Corporate Transit Fee, effective retroactively to January 1st, has raised concerns among businesses about the state’s commitment to maintaining a competitive tax environment.
Neighboring states like Pennsylvania are moving towards a more business-friendly tax structure, aiming for a top CBT rate of 4.9%. Meanwhile, New York has decided against raising its corporate tax rate, maintaining it at 7.25%, which is significantly lower than New Jersey’s rate.
The uncertainty generated by fluctuating tax policies is causing trepidation among New Jersey’s corporations. Companies that had based their financial projections on the promise of a surcharge sunset now face the prospect of restating their financials to account for the unexpected tax increase. This not only impacts their balance sheets and stock prices but also their investment decisions in the state.
Furthermore, there is concern that additional costs resulting from these tax changes may ultimately be passed on to consumers, contradicting efforts to make New Jersey more affordable. The proposed Corporate Transit Fee could potentially hinder job creation and economic growth by positioning New Jersey as a less attractive option for business operations.
Christopher Emigholz, Chief Government Affairs Officer with the New Jersey Business & Industry Association, urges legislators to consider the broader implications of such tax increases on the state’s economy and competitiveness. The goal is to foster an environment conducive to job creation for New Jersey residents, and a substantial business tax hike could be an obstacle to achieving this objective.
