The New Jersey Business & Industry Association, in an effort to reframe the fight, said the concerns with the proposed Corporate Transit Fee — a 2.5% tax on the state’s largest companies to pay for New Jersey Transit — go far beyond those large companies.
In a message delivered by a group of New Jersey business leaders at NJBIA headquarters in Trenton on Tuesday, leaders said the biggest threat is not legacy companies leaving, but that the slow drip of companies already making workforce, research and facility investments in other states will turn into a torrent.
The event was part of NJBIA’s continuing Do Better for Business campaign. It also included regional chambers of commerce that have experienced firsthand the ripple effect on municipal budgets and local economies when a major corporation in their community leaves, and was held to send a message to the Legislature, which still needs to agree to the proposal.
See the videos
The latest videos from the New Jersey Business & Industry Association’s Do Better for Business campaign — ones that urge the Legislature to reject Gov. Phil Murphy’s Corporate Transit Fee proposal — can be found here.
“We certainly do not want to see any company leave,” NJBIA CEO Michele Siekerka said. “But I think the bigger threat is the lack of future reinvestment here.”
Companies that have been headquartered in New Jersey a long time are not likely to close their doors immediately, but, when that company has its next opportunity to create 100 or 1,000 jobs, or build a new facility, it will look to do it in a more tax-friendly, affordable state, Siekerka said.
“When we have financial institutions here in New Jersey that choose to place 1,000 jobs in Delaware versus New Jersey, we should be conscious of that,” Siekerka said.
Gov. Phil Murphy has proposed raising New Jersey’s CBT rate on the state’s 600 largest companies from 9% to 11.5%, the highest in the nation, by far.
Lori Roth, co-managing partner of the Prager Metis accounting firm and the vice chair of NJBIA’s board of trustees, noted the retroactivity of the tax increase is extremely problematic for the large companies.
The governor had repeatedly promised them the temporary 2.5% Corporate Business Tax surcharge would be repealed on Jan. 1, 2024, but now is calling for it to be replaced with a permanent retroactive 2.5% surtax of another name.
“These businesses were told time and time again that, as of Jan. 1, 2024, the 2.5% surcharge was going away,” Roth said. “Now, should this proposal go through, that tax is back and that is something unplanned and unbudgeted for.”
And the impact goes beyond the 600 or so major corporations affected by the tax, Roth said. Shareholders are affected, as well as the retirement plans that smaller businesses have, which include investments in these major New Jersey companies.
Siekerka, Roth and Christina Renna, CEO of the Chamber of Commerce Southern New Jersey, said these large, publicly traded companies have asked NJBIA and the New Jersey Business Coalition to make sure the Legislature understands the impact this tax will have on their workforces, and ability to make future investments in New Jersey.
Roth said large corporations are reluctant to speak directly to the press about these realities because they “don’t want to scare their workforces” and, as publicly traded companies, are bound by Securities and Exchange Commission rules about making forward-looking statements.
Therefore, these corporate leaders are relying on NJBIA to persuade the Legislature to reject the governor’s plan to raise the CBT rate to 11.5% because of the impact it will have on their workforces and their ability to make investments in new facilities and innovation in New Jersey.
Renna said the proposed tax was an especially “bitter pillow to swallow” for South Jersey companies because NJ Transit is not a major factor in that part of the state.
“These larger businesses are being asked to pay a 2.5% fee on top of the 9% corporate business tax they’re already paying, to pay for a public service that they do not use, and that their employees do not use,” Renna said.
Albert LiCata, the president of Bernards Township Regional Chamber of Commerce, discussed the local impact on municipalities when a major corporation leaves.
Twenty years ago, when he was the mayor of a municipality in Somerset County, a company relocated and left its 1 million-square-foot corporate campus vacant and a huge hole in the municipal budget because of the loss of property tax revenue.
“The vacuum that created … 30% to 40% of the hotel, hospitality and restaurant industry bottomed out and some even closed their doors because they couldn’t handle the loss of revenues,” LiCata said. “Transportation businesses, business support, retail all went down 40% to 50% almost immediately with the loss of those great-paying jobs.”
The local real estate market also took a major hit, as thousands of former employees tried to sell their homes, creating high inventory that depressed home prices, he said.
“We saw problems with our residential units being sold, values were going down and people’s nest eggs were being affected,” LiCata said. “If this happens again on a grand scale in New Jersey, and people start to move, then, mayors, governing bodies and chambers of commerce, get ready to deal with these things, because they are a reality.”
