Thousands of New Jersey small businesses are fighting for their very survival, but that has not stopped the governor and legislative leaders from creating new government spending programs unrelated to COVID-19 and hiking taxes on businesses to pay for them.
NJBIA President and CEO Michele Siekerka took to the airwaves to criticize the Legislature’s FY 2021 spending plan this morning following yesterday’s approval by the Senate and Assembly budget committees.
“We don’t need these tax increases. We don’t need this excessive borrowing. We don’t need any of it,” Siekerka told NJ1015 morning show host Bill Spadea during a live appearance. “We can balance this budget and we can do it responsibly.”
Instead, lawmakers are poised to hurt small businesses that are already reeling. Take the income tax increase.
Gov. Phil Murphy, Senate President Steve Sweeney and Assembly Speaker Craig Coughlin last week agreed to increase the state’s gross income tax rate on income between $1 million and $5 million from 8.97% to 10.75%. Siekerka explained that this is a tax on small businesses because owners of small businesses like S corporations have to declare all of their business income on their personal income tax returns.
“That’s why it matters, because now you’re having a tax impact on small businesses,” Siekerka said. “It’s not just individuals we deem the wealthiest in the State of New Jersey” who will pay the higher tax rates.
She said that New Jersey was seeing the effects of its tax policies in the economy by the amount of wealth that is leaving New Jersey. According to NJBIA’s studies, outmigration has cost New Jersey about $24 billion in wealth in the last 12 years of available data.
What’s particularly egregious is the tax increases are not being used to make up for lost revenues caused by the health emergency. The income tax increase, for instance, would be used to create a tax rebate of up to $500 for certain individuals. Murphy also proposed giving $1,000 bonds for children born in this state, subject to income limits, but that is no longer in the budget bill.
Additionally, lawmakers added another $500 million to the $4 billion Murphy wants to borrow for operating expenses. As Siekerka pointed out, such borrowing will require debt service from taxpayers in the future.
“Those same middle-class taxpayers (receiving the new tax rebate) are the ones who are going to be paying for the increased borrowing for generations to come,” Siekerka said.
So what should be done?
“Do you know how we fix this budget? We get our economy humming,” Siekerka said. “And you know how we do that? We get these businesses’ capacity increased and get them open again. And then get people back to work. That’s how the middle class will be taken care of: Let’s get them back to work and get them off unemployment.”