The State Business Tax Climate Index is a measure of how well states structure their tax systems. To do that, the Index analyzes more than 120 variables in the five major areas of taxation—corporate taxes, individual income taxes, sales taxes, property taxes, and unemployment insurance taxes.
Of the five types of taxes studied, New Jersey scored worst in the U.S. for individual taxes (No. 50) and near the bottom for corporate taxes (No. 48). The study was finished before Gov. Phil Murphy and the Legislature raised both of those taxes even higher Oct. 1.
As part of the FY2021 budget, the income tax rate was raised from 8.75% to 10.75% for incomes between $1 million and $5 million and the Corporation Business Tax rate was raised to 11.5%.
“This national study reinforces what NJBIA has been saying for many years: New Jersey is uncompetitive because of its overly burdensome tax structure,” NJBIA President & CEO Michele Siekerka said. “New Jersey will remain an outlier unless our policymakers do more to address our affordability challenges with systemic state budget reforms that will make New Jersey more competitive and business-friendly.”
In the other areas of taxation the foundation studied, New Jersey ranked No. 42 for sales tax, No. 46 for property taxes and No. 31 for its unemployment taxes. However, New Jersey employers are facing steep increases in unemployment tax rates in July 2021 because the state’s Unemployment Insurance Trust Fund is now broke because of high unemployment caused by the COVID-19 pandemic.
The trust fund had $2.9 billion as recently as February, but has since had to take out a $1.7 billion line of credit with the federal government in order to continue paying unemployment claims, officials said last month.