There have been two recent laws signed to improve New Jersey’s business climate and an announcement by Gov. Phil Murphy this week that he’ll let a 2.5% corporate business surcharge sunset at the end of 2023, as scheduled.
Could this be the start of a more positive New Jersey business-friendly trend by policymakers, or will the needle move no further?
“I’m generally a half-glass full girl, but I really am optimistic that we could see the pendulum swing back to bring New Jersey businesses – especially our small businesses – a bit more relief and consideration,” NJBIA President and CEO Michele Siekerka said.
“Although we didn’t necessarily hear comprehensive talk of small business relief in the Governor’s State of the State speech this week, he did address other business concerns relating to liquor licenses and boardwalks. I do feel the administration has been more receptive to our concerns and the Legislature certainly heard those concerns front-and-center at our Public Policy Forum last month.
“So, as with all things, time will tell. Just hopefully not too much time. These are the priorities we have been fighting for and will continue to fight for.”
On Bloomberg’s ‘Balance of Power’ program this week, Murphy said he has agreed to end a 2.5% corporate business surcharge that is scheduled to sunset at the end of 2023.
“I’m on the side (of) a deal is a deal,” Murphy said. “We’ve committed that (the surcharge) would lapse and go away. And that’s where I am as we speak.”
In 2018, New Jersey’s corporate tax rate rose from 9% to a national CBT high of 11.5% with the 2.5% surcharge. The termed “temporary increase” was originally scheduled to phase down to 10.5% in 2020 and back to 9% in 2021.
The 2.5 percentage point surcharge, however, was extended by the Legislature in 2020 until the end of 2023.
At NJBIA’s Public Policy Forum last month, Senate Budget Chair Paul Sarlo said New Jersey must allow its extended corporate business tax surcharge to sunset at the end of 2023.
In a statement 0n Thursday, Sarlo said he “welcomed the Governor’s support in ending the surcharge when it expires at the end of the year.”
“That was our intention when it was first implemented, and I reinforced that commitment in December,” Sarlo said. “It’s important that we keep our promises so the business community can plan and operate with certainty. Removing the surcharge will provide tax relief that will help fuel the economy and continue to ensure that New Jersey is an affordable place to operate.”
Siekerka, however, has suggested more should be done for New Jersey to compete with regional states. She explained at NJBIA’s Public Policy Forum that Pennsylvania has cut its 9.99% corporate tax rate by 1% effective in January and is on a path to gradually reduce the rate to 4.99% by 2031.
“We do not want to be dismissive of the sunset of the surcharge,” Siekerka said. “Yes, this is something that should happen. But it is a big deal, and we’ll cheer to the mountains when that happens.
“At the same time, it really should be a step given what our neighbors are doing with CBT. We do not want to remainsa a national outlier with this tax for competitive reasons.”
Belief in Relief?
Assemblyman Gerry Scharfenberger and Assemblywoman Victoria Flynn have already introduced legislation (A-4907) that would get rid of the 2.5% surcharge, while also reducing the CBT rate to 7.5%
And Murphy, for his part, hinted at other tax cuts during the Bloomberg interview as possibly part of his FY24 State Budget address.
Siekerka noted in her post-State of the State statement that New Jersey businesses were shut out of the ANCHOR Property Tax Relief program, even though they pay nearly half of the state’s property taxes.
“Plus, we must remember that while others in New Jersey have received tax cuts, our businesses saw a $1 billion tax unemployment insurance tax increase after the pandemic that forced many of them to shut down or have extended restrictions,” she said.
Siekerka also gave credit to several important steps recently taken by the Murphy administration to improve the business climate in New Jersey.
She cited last week’s signing of bill A-573, which expedites construction inspections. She also noted last month’s signing of bill A-4929, bringing flexibility to New Jersey economic incentive requirements.
“These are all great things, and we look forward to working with the administration to find more ways to help New Jersey businesses,” she said. “We really would, however, like to see our small businesses get that tax relief somehow. They’ve dealt with so many policies that have reduced their bottom line in recent years and they have seen a major tax increase, without receiving any of the federal COVID recovery funds available to them.
“If any significant relief happens, it will certainly be greatly welcomed by the business community.”