Senate President Stephen Sweeney has rightfully expressed strong reservations regarding the “millionaires tax” that would only chase out our highest taxpayers. But his proposal to increase the business income tax by 3 percent would send a similar chilling message across our state. This proposed surcharge will place New Jersey as tied for the highest corporate income tax rate in the United States, at 12 percent.
Add this as one more message to our New Jersey employers that we prefer they grow jobs in other states.
- U.S. News & World Report, in partnership with McKinsey & Co., ranks New Jersey as 45th in Economic Growth, which “measures the economic future of a state, and can be a strong indicator of up-and-coming locations for businesses and entrepreneurs.” Of our near neighbors — Pennsylvania, New York, Delaware and Connecticut — only Connecticut ranks lower in Growth (48th)
- Forbes’ Best States for Business in 2017 ranked New Jersey at No. 39, again below Pennsylvania, at No. 27, New York at No. 29 and Delaware at No. 30. But Connecticut was lower, at No. 42.
- The Tax Foundation’s 2018 business climate assessment ranks New Jersey dead last — 50th.
- Chiefexecutive.net surveys national businesses every year, and New Jersey ranks 47th in terms of states where they plan to expand.
Benchmarking our competitiveness, against both nearby states and those competing for certain industries, is essential to long-term growth for New Jersey’s economy. While tax rates are not the only element in industries’ evaluation of where to grow jobs, it can provide the marginal factor to the ultimate investment and location decisions. New Jersey ranks 48th in terms of GDP growth since 2000, according to the U.S. Bureau of Economic Analysis. We need not compound the barriers to new investment and jobs.
Following California’s lead on corporate tax surcharges to drive headlines touting the presumed right of any government to the investment capacity of private firms, drives away investment, not incents it. Is it so far back in our memory that we ignore that business income surcharges, preceded by multiple tax increases by Connecticut’s governor, were the tipping point for General Electric? Connecticut’s failure to attract new investment is most prominently evidenced by its not regaining all the private-sector jobs lost during the Great Recession until June 2017, per a Garden State Initiative report. The most recent figures from the IRS confirm that, in the wake of its tax hikes, Connecticut continues to hemorrhage tens of thousands of residents and billions of dollars in income on an annual basis.
The Garden State Initiative has a tax competitiveness analysis in progress assessing the business tax environments of six states — Connecticut, New Jersey, New York, North Carolina, Ohio and Pennsylvania — for six key New Jersey industries, three in the manufacturing sector and three commercial industries.
The results of our preliminary analysis show that, out of six benchmark states, New Jersey often imposes the second- or third-highest tax burden.
We have the opportunity to confront the root cause of our state’s declining competitiveness: the escalating cost of living for individuals, and the declining return on investment for employers. Every day, our New Jersey employers figure out how to prevail in competitive markets by improving service to their customers at lower and lower costs. Our government, across municipal, county and state operations, needs the same know-how to lower the cost of delivery of government functions, while at the same time improving service to our citizens.
Why aren’t our political leaders asking for that kind of know-how investment from committed New Jersey employers, rather than repeating the same tactics of tax surcharges and escalating cost of living for individuals that are driving Connecticut’s demise?