When it comes to the overall business tax climate in the U.S, The Tax Foundation recently ranked New Jersey dead-last.
New Jersey’s 11.5% corporate income tax rate is the worst ranking among states that have such a tax, and one New Jersey Republican lawmaker thinks the time is now to fix this dynamic.
Assemblyman Christopher DePhillips (R-40) pointed to a 2018 law which levied an additional 2.5% corporate business surcharge on businesses earning over $1 million, which was not scheduled to sunset until Jan. 1, 2024.
Time for a Change
“New Jersey can’t keep coming in last for business climate and remain competitive. Pennsylvania is on a path to gradually lower their corporate rate to 4.99% by 2031 while New Jersey charges a nation-high 11.5% rate,” DePhillips said.
“It is imperative that we put policies in place to attract and retain business and that starts by cutting our corporate business tax. I am calling on Legislative leadership again to post my bill for consideration,” the Wyckoff lawmaker said.
The Need for a Legislative Fix
DePhillips pointed to a pair of bills that could help improve the tax climate for businesses operating in New Jersey, including A-1146 which would gradually lower the corporate business tax from its current 11.5% rate to 2.5% within four years.
If realized, the rate would match North Carolina’s, which currently boasts the lowest-in-the-nation rate.
Additionally, businesses making less than $100,000 per year would see the benefits within two years.
Driving Businesses Out
“The extra revenue from the surcharge and high corporate tax rate is not worth the fall out,” DePhillips argued. “The more we continue to drive these businesses and corporations out of the state, the more we are going to hurt regular families.”
Another bill put forth by DePhillips was A-2487/S-2702, which would increased the qualified research expenses tax credit to 15% from the current 10% for targeted businesses.
Advanced transportation and logistics, manufacturing, aviation, autonomous vehicle and zero-emission vehicle research or development, clean energy, life sciences, hemp processing, information and high technology, finance and insurance, professional services, film and digital media, non-retail food and beverage businesses would all be eligible for the increased tax credit.
The New Jersey Business & Industry Association (NJBIA) offered its support for the bill, which was informed by the group’s Indicators of Innovation reports from 2020 and 2022.
“Making it easier for businesses to invest in new technologies can only lead to economic growth and strength for our state and for our families,” DePhillips said.
“New Jersey has the location, the schools and education, and a highly skilled workforce to make it the envy of not only the Northeast but the country, if only we would create a tax and business climate to follow.”