While Gov. Phil Murphy’s FY25 budget plan calls for a $1 billion-plus tax hike on New Jersey’s largest employers, it appears that neighboring New York may be going in a different direction when it comes to corporate taxes.
New York’s Senate and Assembly had approved corporate tax hikes through budget resolutions last month, but its Assembly Speaker, Carl Heastie, signaled this week they would not be included in a final spending plan.
“I don’t think a lack of revenue is a major issue in the budget at this point,” Heastie said as New York lawmakers approved an extension of his budget talks until next week.
NJBIA President and CEO Michele Siekerka said New York maintaining its current 7.25% corporate tax rate makes New Jersey’s competitiveness even more challenging if lawmakers agree with Gov. Murphy’s proposal to re-establish a top corporate rate of 11.5% percent through a new 2.5% “Corporate Transit Fee” on the state’s top job creators.
That 11.5% rate would return New Jersey to the highest corporate tax rate in the nation, by far.
“When you think about it, even if New York was to increase its top corporate rate to 9% as proposed last month, it would still have a huge advantage over New Jersey’s anticipated top rate,” Siekerka said.
“But if New York sticks to its 7.25% rate, it really makes New Jersey’s competitiveness even more challenging, especially given our current business climate.
“Factor in that Pennsylvania is on a path to lower its top rate to 4.9%. Additionally, other states that are lowering their top corporate tax rates are appreciating great stimulative benefits to their economy, putting New Jersey at a great disadvantage.”
BUSINESS IMPACTS ON TAX HIKE
Siekerka said she has spoken to multiple executives whose companies will be impacted by Gov. Murphy’s sudden and unexpected decision to essentially reverse the sunset of a temporary 2.5% surcharge with a new corporate transit fee, retroactive to January 1, which he said will be dedicated to NJ TRANSIT funding.
Their overall take? They’re not happy, and quite concerned, she said.
“Each affected company has different reasons for frustration with this unnecessary tax increase, with every reason being practical and real.,” she said.
“You have some who based their 2024 financial projections on the promise of the governor to sunset the surcharge. Now they will have to re-state their financials with a claw back, which hurts their balance sheet and stocks.
“You have companies who are already thinking about downsizing once their leases expire and now they think: ‘Maybe it’s time to make that downsize out of New Jersey.’ You have others who will pass through added costs to their customers, which flies in the face of making New Jersey more affordable for residents.
“You have others asking themselves why they would continue to reinvest and grow here, verses additional growth in lower-cost states given this tax increase and the other cost and regulation challenges here.”
COULD NJ FOLLOW SUIT?
Siekerka was asked if New York was to step away from a proposed corporate tax hike before a finalized budget next week, couldn’t New Jersey possibly do the same by the end of June?
“Well, I’m a glass-half-full person and, of course, so many things can happen between now and June 30,” Siekerka said. “But at the same time, we need to make sure that we have done our very best to explain the real-life ramifications of keeping New Jersey as a national outlier on business taxes when many other states are doing the opposite, so that our policymakers are well informed and reject this proposal.
“I realize that the notion of funding NJ TRANSIT with this money may sound practical to some, but it’s far from it. The nexus is off, and we would be the only state to do so. Further, it would take a constitutional dedication to even make it possible. And many of our top corporations don’t have employees who use NJ TRANSIT and for some that do, they reimburse their employees.
“As we’ve said quite often, it’s going to take some creative thinking to solve the NJ TRANSIT funding challenges versus just ‘tax businesses some more.’ We need to do better for business in New Jersey.”
