Will New Jersey’s economic competitiveness benefit more by cutting state spending deeply to keep taxes from increasing or maintaining spending that provides top-notch government programs even if it means raising taxes?
How to answer that question played out during Thursday’s NJBIA Government Affairs Policy Committee meeting with two advisors to Gov. Phil Murphy: Joseph Kelley, deputy chief of staff for Economic Growth, and Candice Alfonso, senior economic development project manager.
Kelley said he understands the negative impact that undue taxes could have on New Jersey’s competitiveness and economic growth. At the same time, he said, part of the reason businesses come to New Jersey is for world-class infrastructure, the best K-12 education, and other advantages, which will be difficult to maintain while the state is experiencing a $10 billion drop in tax revenues, according to the administration’s estimates.
The administration must figure out how to maintain the value proposition that New Jersey has always had for executives who decide to move companies here while simultaneously having a state budget going through the tremendous fiscal strain, Kelley said.
NJBIA Vice President for Government Affairs Emigholz, who handles budget and tax issues for the association, noted that early on in the pandemic, the governor and the treasurer indicated that tax increases were “not on the table,” but lately, that seems to have changed. Complicating the issue is the fact that the Murphy administration may now have the unprecedented authority to borrow significantly more money than the estimated shortfall.
“I think the conversation about raising revenues now when borrowing is on the table is something a lot of businesses are going to struggle with,” Emigholz said. “They are down. They are struggling. They’ve been closed, and now you’re going to say their taxes are going to go up?”
Kelley said that the administration has tried to avoid imposing undue taxes on Main Street businesses, which is why the administration has tried to avoid raising the corporate business tax in favor of increasing the income tax rate on millionaires.
Nothing formal has been proposed for the FY 2021 budget, which, under an altered timeline, will now be proposed on August 25 and begins on Oct. 1. Lawmakers enacted what amounts to a three-month extension of the FY 2020 budget that did not include either tax increases or borrowing.
NJBIA recognizes that borrowing money to close the budget deficit may be necessary this year, but has raised concerns about the level and length of borrowing that’s been authorized, up to $9.9 billion over 35 years.