According to the NJBIA, the 14 percent of New Jersey companies earning more than $10 million (340 companies) accounted for nearly 73 percent ($14.89 billion) of total allocated net income for all companies earning $1 million or more in 2015.
Michele Siekerka, President of the NJBIA, said, “While most states have either reduced or maintained their corporate tax rates, New Jersey is poised to go in the wrong direction… Some studies link an increase in CBT to a reduction in employment and income, and a decrease in CBT to quicker job creation. A CBT surcharge would only incentivize our larger corporations to expand their operations elsewhere. And, if they’re stagnating here, that’s just as bad as outmigration for New Jersey.”
Adding insult to injury, legislators have tried to tie corporation’s hands and force them to maintain in-state operations – an approach doomed to certain failure – by requiring what is known in the accounting world as “combined reporting.”
“Combined reporting, where did that come from?” Michael Egenton, vice president of the New Jersey Chamber of Commerce, said. “We were under the assumption that was put on hold.”
The New Jersey Business & Industry Association (“NJBIA”) estimates that the corporate tax increase will impact about 2,373 corporations. NJBIA noted that New Jersey’s ongoing resident outmigration has resulted in a net loss of $25 billion in adjusted gross income over the past 12 years.
The democratic administration is hoping that the CBT tax increases will result in a few hundred million dollars of additional revenue. But, given the outmigration rate of individuals and businesses is much higher on an annual basis than the expected revenue receipts (which assume no outmigration), even a small exodus would eat up all of the potential gains and leave the state bankrupt. It is hard to imagine why Verizon, for instance, wouldn’t simply move operations elsewhere. This is what has happened every time an increase in the CBT has been tried anywhere in the country.
What will be different this time? And some businesses are speaking out and saying they’ve already cemented plans to leave the state. So where will the extra money come from? And where will our state be once jobs move elsewhere?
“This concerning data should serve as fair warning to our policymakers that higher CBT, millionaire’s or sales taxes, on top of the cumulative costs from our recent and increasing business mandates, are only giving our business owners and residents more reason to leave our great state,” said NJBIA CEO and President Michele Siekerka. “And, if they aren’t leaving, they’re certainly not planning to grow here. This analysis speaks to our declining competitiveness in the region and the nation. We need to improve our state’s economy through comprehensive planning, rather than excessive taxation. This is the only way to reclaim our regional competitiveness and to reverse the disturbing trend of outmigration from New Jersey.”
Certainly, New Jersey has just made itself a pariah for big businesses and the least competitive regional player in the market for corporate growth and development.
New Jersey Chamber of Commerce CEO and President Tom Bracken also felt the move was counterproductive: “Raising taxes will not help either of the issues of affordability or business competitiveness, which we need to desperately work on,” he said. “The resolution of that (in the budget) is probably going to be the most impactful for the business community.”