NJBIA President and CEO Michele N. Siekerka, Esq. issued the following today statement regarding the final FY2020 state budget and the expiration of New Jersey’s tax incentive programs.
“While we are pleased that the final FY2020 budget does not include any broad-based tax increases, it is important to recognize that this budget is more than 11 percent higher than FY2018.
“Our policymakers should understand that New Jersey simply cannot sustain such large increases in expenditures every year when our pension liability and post-employment benefit obligation has grown to more than $151 billion.
“After another contentious budget season, New Jersey maintains the top Corporate Business Tax rate, income tax rate, sales tax rate and property tax rate in our region. Governor Murphy has promised to continue the call for more taxes, including a broadening of the state’s top income tax rate of 10.75%. Our concern is the governor will continue to neglect the structural deficiencies that have caused New Jersey’s long-term debt obligations to balloon 382% between 2007 and 2017.
“Extending the top gross income tax rate, which is third in the nation, will not solve our fiscal woes. Nor is it truly a matter of tax fairness when the top 1.5% earners pay more than 40% of the state’s annual gross income tax revenue.
“The bigger overall question for New Jersey is this: If there is such an appetite for more taxes during an economic upswing, who will be taxed next during the eventual economic downturn?
“The “Path to Progress” proposals released last month call for a comprehensive reform agenda to address New Jersey’s structural challenges, including underfunded pensions and right-sizing of health benefit costs. New Jersey desperately needs a commitment to those reforms to put it on a pathway toward a fiscally sound future.”
Tax Incentive Programs
“The decision to not extend New Jersey’s current tax incentive programs until new programs can be established will prove harmful to our economy as we remain challenged to attract and retain both large and small business to our state.
“While it is appropriate that oversight and reviews of the tax incentive programs are in place to ensure their integrity and effectiveness, the decision to not have a transitional arrangement to help level the playing field will strike hard at New Jersey’s overall competitiveness. We must remember it is because of New Jersey’s extremely high cost of doing business – which no one can argue – that tax incentives are so critical in the first place.
“We have already heard from our members that the market for those buying tax credits is dissipating out of concern that credit sales cannot be assumed in this climate. In short, there is no certainty about when the credits will be received in order to consummate sales. It is this chilling effect that hurts the type of companies that need the most assistance, and the ones Governor Murphy would like to grow – smaller pass-through businesses and entrepreneurial startups.
“Our policymakers all agree that tax incentives are an important and effective tool in New Jersey’s overall economic development toolkit. To not have this tool at its disposal for any length of time will render us even less competitive when we already lag behind the region and the nation in economic growth.”