Gov. Phil Murphy’s proposed compromise to legislative leaders on Tuesday night regarding tax increases in the budget may help the state avoid a shutdown.
But it hasn’t made the business community feel any more comfortable.
“The devil is in the details; we would have to look at how it all works,” Michael Egenton, vice president of the New Jersey Chamber of Commerce, said.
Michele Siekerka, CEO and president of the New Jersey Business & Industry Association, echoed Egenton’s thoughts.
They both said there is some hope that both sides are talking, but either tax is unpalatable.
“It’s a tax on job creators,” Siekerka said. “We were hoping to discuss further cuts in spending, because we see opportunities out there.”
In the letter, Murphy proposed implementing both a millionaire’s tax and a corporate business tax hike. (To read Murphy’s letter, click here.)
That would occur in addition to the phased-in increase to 7 percent for the sales tax — which hasn’t received much pushback — and includes what the Office of Management and Budget estimates to be $125 million in revenue for the online sales tax as a result of a recent U.S. Supreme Court ruling.
The business community is still concerned.
That’s because both taxes are already quite high, experts have said, and increasing them negates Murphy’s request: not making New Jersey an outlier.
“We are already an outlier,” Gary Bingel, a tax attorney with EisnerAmper, said.
On the millionaire’s tax, Bingel said the original proposal to raise the income tax on the state’s highest earners from 8.97 percent to 10.75 percent was a significant jump, especially because it pushes into double-digit tax territory.
“No matter what you get it to, unless it’s under 1 percent, it’s going over 10 percent,” Bingel said.
But it’s evident the governor is looking at the top earners in the state to help fund the budget.
“It seems like he’s targeting them,” Bingel said. “If it’s that big a chunk (in revenues for the state), it’s because they are all working on Wall Street and he’s trying to squeeze them out.
“If you’re going after not just the rich, but the uber-rich … those people have a lot more options than a bricklayer of where they can go. If they are living in western New Jersey now, how many of them can say, ‘You know, I can work from home two days a week; I’ll just move another 30 miles out, move into Pennsylvania, and commute in from there,’” Bingel said.
Siekerka said the taxes send a message to business owners, despite the governor’s push for greater funding for transportation and education, and pushing the rhetoric of a greater STEM-based economy.
“The concern with the CBT we have expressed is, if you have a company that is well established and says, ‘Yeah, it takes a lot for me to get up and walk. But I’m just going to stagnate,’” Siekerka said.
“Many of our companies that are larger companies here in New Jersey have numerous facilities in other states, and what they have told us is they will grow those jobs in other states where the environment is more conducive to growth.
“On either hand, we are talking about concern about outmigration or stagnation, neither of which is good for New Jersey.”
In addition, as it relates to the STEM fields, the millionaire’s tax hurts many of those same industries.
“What the governor is trying to do in terms of spur job growth, when he talks about innovation, many small businesses are innovation,” Siekerka said. “Many of those small businesses, entrepreneurs are S-corps, LLCs and partnerships — that’s why the millionaire’s tax hurts them.
“We just need to have people understand that either of these taxes and both of these taxes affects New Jersey’s job creators.”
Bingel added that the taxes counter, specifically, Murphy’s point on New Jersey being an outlier with the proposed 13 percent tax on companies with more than $25 million in allocated revenues in New Jersey.
“No matter what he does, he seems to be putting us as an outlier,” he said. “We’re already an outlier. If you put almost anything on it, we are going to be an outlier nationally.”