Gov. Phil Murphy’s proposed $53.1 billion budget for the 2024 fiscal year will leave the Garden State’s economy worse off in the long term, according to a recent survey conducted by the New Jersey Society of CPAs (NJCPA) and sponsored by Investors Bank.
The survey interviewed more than 275 certified public accounts (CPAs) and found nearly 60% of those interviewed said that Murphy’s proposed budget would leave the state either marginally or significantly worse off over the long haul. More than 20% believing the economy would stay the same, with little or no significant change, while another 20% felt that the economy would be marginally or significantly better.
“We are disappointed that this budget does little to address the affordability issue facing small businesses,” said Ralph Albert Thomas, executive director at the NJCPA.
The governor’s budget proposal, however, contains no new taxes or increases and retains the $2 billion ANCHOR property tax relief program along with doubling New Jersey’s child tax credit initiative.
The proposed budget earmarks additional funding for schools, by expanding universal preschool, along with increasing income limits for senior homeowners applying for a property tax freeze. However, New Jersey homeowners still pay the highest property taxes in the nation, averaging about $9,500 a year.
CPA’s Want Corporate Taxes Reduced
It’s also worth noting that Murphy’s proposed budget will be the highest on record for the state, and although the plan calls for the 2.5% corporation business tax surcharge to sunset on Dec. 31 cutting the top rate from 11.5% down to 9%, New Jersey would still have the fourth-highest tax rate in the nation.
The survey also found that a number of respondents when asked what important action would positively impact and strengthen the business environment in New Jersey; the number one response was additional reduction in the corporate business tax, followed by providing additional state aid to offset the upcoming $300 million unemployment insurance (UI) increase and providing property tax relief for businesses.
“Businesses could be facing yet another $300 million-plus unemployment insurance (UI) increase on July 1, and our members have heard from clients who are rightfully shocked about their UI increases.” said Thomas.
Property Tax Relief
“This would be the third year in a row of skyrocketing UI tax hikes caused by the COVID pandemic, with no state aid to offset it. Many other states used federal COVID aid to reduce UI taxes; New Jersey should do the same.”
Additionally, respondents also called for a reduction in the number of state employees, reforming pension and health benefits for government employees and using only recurring revenues in the budget, which would exclude the one-time federal funds received during the COVID pandemic.
The association cited the need for a new school funding formula as well that is not centered on property taxes, which they called “regressive.”
The main item with which I agree with CPAs is calling the current property tax system “regressive.” The taxes should be income-indexed, with wealthier property owners paying a higher rate to offset discounts for income/cash-poor/middle class residential property owners. It would be so easy to do — simply connect NJ state tax returns with property owner’s tax bills with an appropriate multiplier of the tax rate. For example, someone earning $1,000,000/year might have to pay a multiplier of *1.5 vs someone earning $50,000, who would pay a multiplier of *0.25, or something like that — obviously, the net property tax receipts would have to balance current receipts, so these multipliers would have to be calculated by someone with much greater understanding of the total number of higher income earners vs more modest earners. Fail safes that consider non-primary residence property/cash/investment assets over income could be factored in to prevent wealthy taxpayers from using creative accounting to reduce their income on paper – for example, using gross income (rather than net/taxable income) as a basis for calculating property tax multipliers.