NJBIA Chief Government Affairs Officer Christopher Emigholz told the Senate Budget and Appropriations Committee today that New Jersey is at “an inflection point” regarding state spending and recommended that three business taxes proposed in Gov. Mikie’s Sherrill FY27 budget be removed or mitigated.
Earlier this month, Sherrill proposed a record $60.7 billion budget. Emigholz acknowledged does rein in spending from previous budgets under Gov. Phil Murphy, but more needs to be done.
“In the aggregate, under the last eight budgets under Governor Murphy, we increased the budget spending by $8 billion after he proposed the budget,” Emigholz told the committee at NJIT.
“We have to pull that back. We have to get to a place where we're looking at trying to spend within what we have, not necessarily look to new taxes. And I think we're at an inflection point right now.”
Emigholz said NJBIA was also concerned with three of the administration’s proposed revenue raisers for FY27 that will hurt the business community.
The governor’s FY27 budget plan proposes a temporary $1 million cap on all net operating loss (NOL) deductions under the corporation business tax from tax year 2026 through tax year 2028, which would increase state revenues by $485 million.
Emigholz said it wasn’t accurate to hear that cap characterized as a “loophole.”
“It's not a loophole,” he said. “It actually was Chairman (Paul) Sarlo's bill and Assemblywoman (Eliana) Pintor Marin’s bill in the lower house.
“And we worked together with Treasury, the business community and the Legislature and came to a good bill making sure that businesses get the net operating loss that they deserve to encourage investment in New Jersey.
“We're holding that back temporarily. Don't love it, but let's make sure it's temporary. And if it's three-year temporary holdback, let's then give three years to the carry forward for future net operating losses, so they're not actually losing anything, and it's just purely temporary.”
Sarlo agreed with Emigholz assessment of that tax and the remedy.
Also proposed is the elimination of alternative business calculation – commonly known as the ABC deduction – for pass-thru businesses with gross income of $1 million or more is disappointing.
The ABC deduction was part of bipartisan tax reforms enacted 15 years ago to provide equity and parity for pass-through businesses taxpayers (who pay taxes through the owner’s personal income tax return) and corporate business taxpayers.
“The threshold that Governor Sherrill is talking about is $1 million of gross income,” Emigholz said. “I would push back on that, thinking about inflation with restaurants and gas stations. Is a million dollars really appropriate for gross income for the small businesses? I would say not.”
Emigholz also took issue with the plan to levy “assessments” on employers whose workers rely on government-funded health benefits either because they are part-time or decline employer-provided insurance because they prefer not to pay the premiums and co-pays.
He said the proposal to levy a per employee assessment for all private employers with 50 or more employees on NJ FamilyCare the most “anti-business” proposal in the proposed budget.
“There is a flawed report out there that the Department of Human Services puts out that if you have more than 50 of your employees on Medicaid, your name gets on this list,” Emigholz explained.
“The issue is that includes part-time people that are not eligible for benefits. That includes seasonal workers. That includes teen workers. That includes disabled workers. We want to hire more individuals with development disabilities. They show up on these lists because those citizens of New Jersey usually are on Medicaid.
“We’ve got to make sure we get this right. We should not be penalizing an employer for hiring part-time, teenage, seasonal, disabled workers. That's what this assessment would do. So we’ve got to fix that, and we got to make sure it's not part of the budget,” Emigholz said.
