Legislative leaders speaking at NJBIA’s Public Policy Forum on Tuesday told the business community that relief from the recent unemployment trust fund tax increase and the corporate business tax surcharge would be among their top priorities in 2023.
The event in Iselin was held a day after NJBIA released the findings of its 64th Annual Business Outlook Survey in which 75% of respondents said Gov. Phil Murphy and the Legislature were not doing enough to make the state affordable for New Jersey businesses. Strikingly, 82% of respondents said New Jersey was either somewhat affordable or unaffordable for businesses.
NJ101.5’s Eric Scott, who co-moderated the legislative leaders panel discussion, sought answers on the future of a stalled bill that would provide businesses with some relief from the $1 billion payroll tax increase to replenish the Unemployment Insurance Trust Fund. The bill was unanimously approved by the Assembly but pulled from the Senate’s agenda in June at the request of the Murphy administration.
Senate Deputy Majority Leader Paul Sarlo (D-36) said the bill was removed from the board list on the day of the scheduled vote because there was “feedback from the administration that they wanted to put the brakes on it at that point and would not sign it.”
“We need to revisit it, there’s no doubt about it,” Sarlo said, noting the state still has unused federal American Rescue Plan funds and a strong surplus. “We’re waiting on the latest revenue projections, after the holiday sales … we’ll take a closer look at that UI trigger fund and if we can put money toward that. I have a very open mind to doing that.”
The business community also wants the Legislature to allow the 2.5 percentage point surcharge on New Jersey’s top 9% CBT rate to sunset as scheduled by law on Jan. 1, 2024. This 11.5% effective tax rate, first enacted in 2018, was supposed to be temporary and has already been extended once before by the Legislature.
“We need to examine the corporate business tax as we go into the next budget,” Assembly Speaker Craig Coughlin (D-19) said.
Sarlo and Senate Minority Leader Steve Oroho (R-24) said there the CBT surcharge must not be extended a second time.
“We must allow it to sunset and I’m going to be very vocal about that in the legislative process,” Senator Sarlo said.
Oroho said the Senate Republicans prefer repealing the CBT surcharge immediately as part of a tax restructuring plan.
“Get rid of the surcharge,” Oroho said. “I think we could do that right away now that our revenues are actually doing better. That would send a big signal.”
NJBIA President & CEO Michele Siekerka pointed out that Pennsylvania has cut its corporate tax rate by 1% effective in January and is on a path to gradually reduce the rate to 4.49% by 2031. Even if New Jersey allows its CBT surcharge to sunset and returns to a 9% CBT rate in 2024, the Garden State will be at a competitive disadvantage to its neighbor, she said.
Oroho also called for indexing individual state income tax rates to brackets that adjust for inflation, as the federal government did decades ago. This would help small businesses that pay their taxes as pass-through entities on the owner’s individual income tax. Oroho also called for raising the retirement income exclusion and the deduction for charitable contributions.
“If we have tax restructuring… I think quite frankly we do much better at retaining our capital,” Oroho said.
Assembly Minority Leader John DiMaio (R-23) said overregulation that businesses deal with daily also contributes to New Jersey’s affordability program. Sometimes bureaucratic squabbles between agencies such as the Department of Environmental Protection and Department Transportation can mire down infrastructure improvements that benefit the economy, he said.
“It seems like this governor, this administration, has become all powerful and the majority party has allowed this to happen,” DiMaio said. “DEP throws roadblocks on DOT – so there’s this problem of overregulation even within our own administration. This has gone on for a long time where you have these competing egos … we’ve got to get things moving.”
Assembly Speaker Coughlin said lawmakers want to work with the business community on ways to navigate regulations effectively and make the state more affordable.
“I think we need to continue to work with our business partners to figure out a comprehensive way to change New Jersey’s image and, candidly, I think our business image would be better served if we all got on the same page… talk about what’s good rather than focusing on challenges…,” Coughlin said.
“We certainly can’t ignore the challenges but let’s talk about what’s good like the $11 billion investment in economic development that we did a couple of years ago,” Coughlin said. “Is there more to be done? Sure. There’s always more to be done.”
To view the recording of the discussion, go here.