More than 75 percent of the 921 certified public accountants (CPAs) who were surveyed by the New Jersey Society of CPAs (NJCPA) in July said that New Jersey’s 2019 state budget, which was signed by Governor Murphy on July 1, would have a negative impact on the state’s economy. Thirty-nine percent felt the economy would get “marginally worse,” and 37 percent said it would get “significantly worse.” Fourteen percent said it would have no impact, and only 10 percent said the economy would get either “marginally better” or “significantly better” under the new budget.
The budget consists of $37.4 billion in spending, to be funded in part by instituting a tax increase from 8.97 percent to 10.75 percent on taxpayer income of more than $5 million. The budget also included several significant corporate business tax changes, including a surcharge of 2.5 percent for the next two years and 1.5 percent for the subsequent two years for corporations with income of $1 million or more as well as a new combined reporting system. No change was made to the sales tax rate though a tax will be levied on e-cigarettes and short-term lodging, such as Airbnb.
NJCPA survey respondents cited several reasons why the budget plan will not help the state’s economy over the long term. Taxing millionaires could lead to more residents in high-income brackets leaving the state, said respondents. As one noted, “the outward migration of wealth will continue, and the long-term effect will be disastrous.”
Survey participants also said the tax increases on corporations will not help the hiring process or provide incentives to remain in the state. It will likely make the state less friendly to investors and businesses.
Those in favor of the budget plan supported Governor Murphy’s decisions to leave the sales tax unchanged, provide more support for transportation in the state and increase the state property tax deduction cap for New Jersey homeowners from $10,000 to $15,000. The budget also calls for additional money to aid public schools, more property tax relief and more cash to NJ Transit, in addition to instituting a 90-day tax amnesty program that is expected to raise $200 million.
NJCPA periodically polls its members about important legislative proposals, economic developments or other issues affecting the Society, our state and/or the business climate in New Jersey. As Ralph Albert Thomas, CEO and executive director of NJCPA, explains, “our polls lead to action in more ways than one. We use them as important sources of information to present to New Jersey legislators and to our own board.”