NJBIA and the Garden State Initiative jointly released a 1-page infographic today to present timely facts relating to the scheduled sunset of the 2.5% Corporation Business Tax surtax, as well as the many economic benefits of lowering the state’s CBT rate.
Gov. Phil Murphy has committed to letting the temporary surtax sunset, as scheduled, at the end of this year and Senate Budget Chair Paul Sarlo has agreed that the surtax must expire at the end of this year. Other lawmakers have drafted legislation to lower the CBT beyond the sunset.
Despite the fact New Jersey’s current CBT rate of 11.5% is by far the highest in the nation and its rate will be the fourth highest at 9.0% after the sunset, critics of the sunset continue to put forth incomplete, misleading or incorrect statements in their opposition.
“This document is intended to simplify, bring context and separate fact from fiction as it relates to the CBT,” said NJBIA President and CEO Michele Siekerka. “There is great importance in lowering the CBT for economic benefits, both for employers and employees, and for New Jersey’s overall business competitiveness.
“We thank Governor Murphy and the many legislators in support of sunsetting the CBT surtax and we look forward to further discussions to improve New Jersey’s business tax standing going forward.”
“In this age of ‘misinformation,’ it is important to deal in facts and dispel erroneous rhetoric,” stated Regina M. Egea, president of the Garden State Initiative. “The facts are that states that have undertaken business tax reform have seen broad benefits to residents in the form of more jobs, higher incomes and growing economies.
“Governor Murphy’s plan to allow the CBT surcharge to sunset as promised is an important first step to reviving our state’s economy.”
In addition to clarifying and correcting inaccurate statements regarding to CBT reductions, NJBIA also cites recent analysis conducted by GSI showing the following examples of how states have been benefited economically from lowered CBT rates including:
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Since the year before North Carolina’s CBT reductions became effective in 2013, employment has grown 16.5%, or 1.85% annually, in under a decade.
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Scaling those results to NJ’s workforce size, our state would see an additional 750,000 jobs within the next 10 years.
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In the same time frame, North Carolina’s total private business establishments expanded 32.7%, or 3.2% annually.
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In 2012, Indiana held the 15th highest corporate income tax rate in the nation at 8.5%. Today, the state has reduced its corporate income tax rate to 4.9%, or 11th lowest in the nation. From January 2013 to just prior to the pandemic decline in December of 2019, Indiana employment grew 14.8%.
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A federal analysis by the Council of Economic Advisors also finds data that lower CBT rates incentivize capital investment, leading to overall higher demand for workers and more productive labor and wage growth.
Neighboring Pennsylvania is also on a path to reduce its business tax – called Corporate Net Income – from 9.99% to 4.99% by 2031.
In making a case for the Pennsylvania plan, a state analysis found the following:
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Lowering the CNI by one point would increase Pennsylvania’s population by an additional 18,000 people in the first year and that population will continue to grow in each successive year.
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The 23 states with the lowest CBT/CNI rate experienced significant growth in typical home value compared to the 23 states with the highest rates.
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The difference between average union and non-union hourly wages is $1.88 greater in states with CBT rates below 4% than in states with rates of 9% and above.
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Applying Pennsylvania’s data to New Jersey, a 1% decrease in the top marginal CBT rate would lead to a meaningful increase of up to $223.35 annually in New Jersey workers’ wages based on annual mean wage in Pennsylvania in 2020.
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States with the lowest CNI/CBT rates experienced 10% higher growth in state revenues from 2000 to 2020 compared states with higher rates.
To see the NJBIA/GSI 1-page CBT infographic, click here.
