What Gov. Murphy and the State Legislature call “investments” in our state’s future, New Jersey businesses see as runaway spending and a return to the tax-and-spend politics of the past that once made our economy one of the most non-productive in America. With the business community just starting to make real progress, the tax hikes they are proposing for the 2019 budget could put New Jersey right back in the hole.
While Governor Murphy, Senate President Sweeney and Speaker Coughlin are debating which taxes to raise, one would hope they would realize the devastating impact that raising the Corporate Business Tax Surcharge by 4% for large corporations – a staggering 44% increase – would have on investment and job creation in New Jersey. Current reports indicate the Governor supports an unspecified but “modified Corporate Business Tax surcharge.”
However, Governor Murphy now wants that modified tax hike to be in place on a “recurring basis,” which can only be interpreted as meaning “permanent”. That would be a real disaster for some of New Jersey’s biggest employers and most important corporate citizens.
Publicly traded companies would be hit twice by a permanent corporate tax increase. Not only would they have to deplete their reserves and earnings to pay the increased taxes, but because of accounting rules they would also face significant changes in their deferred tax liabilities. Under a permanent tax increase, larger corporations would incur a hefty one-time charge against current net income, a charge that would be perceived as highly negative by investors, lenders, and Wall Street.
If Trenton lawmakers choose to go the tax increase route to finalize this year’s budget, the only way to avoid that outcome is to make any increase in New Jersey’s corporate tax temporary and not permanent. If the legislature approves a permanent corporate tax hike, it will be much harder for many of the large, longtime New Jersey companies, that employ many of our residents, to justify their investments in the state.
At a time when New Jersey has a serious debt problem, including $90 billion in unfunded pension fund liabilities, the focus should be on how to attract new investment and not on funding new programs New Jersey cannot afford. That’s not the way good government works.
If we want jobs and a strong economy, we have to make New Jersey’s tax policies competitive with those of other states. A permanent tax hike on New Jersey companies would discourage investment, kill job creation, and hand us back a reputation as one of the most business-unfriendly states in the nation. That’s not a title we want to reclaim.
Anthony Russo is President of the Commerce and Industry Association of New Jersey