State Senate President Stephen Sweeney has crafted his own response to Gov. Phil Murphy’s millionaires tax push — taxing million-dollar corporations.
The announcement of a bill Monday has resulted in mixed responses from business and policy experts, and concerns that were similar to those over the millionaires tax: how will either tax scheme affect the competitiveness of the state?
Sweeney’s tax proposal includes a 3 percent surcharge on corporations earning more than $1 million in annual net income, which Sweeney (D-West Deptford) says will result in a $657 million tax increase statewide. This is a result of the tax break from the federal level, which Sweeney intends to reroute into the state.
“It’s clear that Democrats still don’t understand that New Jersey is in competition for employers and jobs with other states,” said Sen. Tom Kean Jr. (R-Westfield). “Our high tax rates already put New Jersey at a disadvantage. If we raise taxes even higher, we won’t ‘recapture’ anything from businesses that choose to move away to the many other states that will let them keep their federal tax savings. The price for bad tax policy doesn’t fall on faceless corporations, but on middle-class families that lose jobs, raises and an opportunity to build financial security. It is unfortunate that Senate President Sweeney has pulled back from his anti-tax talk, which echoed the arguments Republicans have been making for years about New Jersey’s crisis of affordability.”
Meanwhile, the think tank New Jersey Policy Perspective was supportive of the move.
“Senate President Sweeney’s proposal is a sensible step to recoup some of the windfall that profitable corporations will get from the new federal tax law. But let’s be clear: By itself, it will not produce enough new revenue to invest in New Jersey’s neglected assets and put the state back on the path to prosperity. It is, in short, a welcome first step,” said President Gordon MacInnes.
Sweeney said in his announcement that the $657 million is still only a fraction of the total $2.9 billion that 2,375 companies are getting in New Jersey.
The bill would not affect 42,000 corporations that earn less than $1 million, nor would it touch 260,000 S corporations and business partnerships.
“The Republican plan provided a huge tax cut for corporations, slashing the federal corporate tax rate from 35 percent to 21 percent, while sharply limiting the federal income tax deduction for state and local taxes on which millions of New Jerseyans depended,” Sweeney said. “My bill would recapture a portion of that corporate windfall to fund programs that will make New Jersey a better place to live and work. We have to be smart about tax policy because the new federal tax law changed all the rules.”
The New Jersey Business & Industry Association and New Jersey Chamber of Commerce also issued a joint statement on the plan.
“It is estimated that New Jersey’s tax revenue will increase up to nearly 12 percent because of this,” the organizations said. “Therefore, this proposed 3 percent tax increase would be on top of the federal tax burden these companies are now paying, and could increase the taxes paid by affected companies by up to 50 percent.
“Further, we need to acknowledge that, since the federal tax reform initiative became law, New Jersey corporations have been reinvesting their savings in the state, providing wage increases and salary bonuses to their workers, and rebates and price cuts for their consumers. No doubt this tax increase will impact that.”