Murphy ‘Significant’ Tax Cut Sparks Debate
Governor Murphy’s commitment to let New Jersey’s Corporate Business Tax Surcharge (CBT) lapse at the end of the year will mean a $5 million windfall for some of the world’s largest corporations that are already posting $100 million in annual profits, according to an analysis from the New Jersey Policy Perspectives, a non-partisan think tank.
New Jersey’s forgoing of the CBT revenue will coincide with the phasing out of billions of dollars in federal COVID state aid.
During a Feb. 22 NJPP virtual press conference Shelia Reynerston, a senior policy analyst with NJPP, told reporters that only two percent of all businesses in New Jersey are currently paying the Corporate Business Tax Surcharge and that sunsetting it would come as the very same corporations continue to enjoy the Trump era tax cuts as well as the lowest business tax rates since 1946.
“We are not talking about mom-and-pop businesses that make up the vast majority of the New Jersey business landscape,” Reynerston said. “We are talking about Amazon, Verizon, Prudential—Wells Fargo. By targeting these mega-corporations that make millions, if not billions in profits every year the surcharge is a sustainable revenue stream paid only by those that can afford it.”
Reynerston argued that making the CBT permanent “would mean more than 37,000 additional pre-K seats or 5,000 more affordable housing units – the state’s College Tuition Assistance Program could be doubled.”
“Unfortunately, one reality we are confronting across the nation is a soaring level of both income and wealth inequality,” said NJPP panelist Marco Guzman, a policy analyst for Institute for Taxation and Economic Policy. “Because of this, it is more vital than ever that states require those families experiencing economic success, to give back the funding needed for the education systems and infrastructure networks that made their success possible.”
New Jersey’s Corporate Business Tax (CBT) surcharge, was originally enacted by Trenton in 2018, was set to sunset in 2020, when the COVID pandemic hit, and the levy, which brought in $600 million last year, was extended until the end of 2023. The 2.5 percent CBT is levied for net profits over $1 million but does not apply to public utilities or New Jersey S Corporations.
MURPHY AGENDA
In a January 12 Bloomberg News appearance, Gov. Phil Murphy said, “a deal is a deal—we committed that would lapse and go away and that’s where I am as we speak.”
“You are going to see significant tax cuts, with a massive historic property tax relief program called ANCHOR for which perhaps two million households are eligible and represents over half our entire population and we are looking at other tax cuts,” Murphy said during his Bloomberg appearance, which were seen as a preview of his upcoming budget address.
Jan. 20, the For the Many NJ coalition, including dozens of unions, social justice and community-based non-profits called on Trenton to extend the big business tax for another year.
“As we enter a budget season with lower revenues and a potential recession on the horizon, this is exactly the wrong time to be giving the most profitable corporations a $600 million tax cut,” the For Many NJ Coalition wrote. “Such a gift for corporations and their shareholders takes away resources from our schools and infrastructure and undermines funding for areas that promote opportunity for all: affordable housing, quality health care, reliable mass transit, and clean energy.”
The New Jersey Chamber of Commerce countered in a statement that not sunsetting the CBT by the end of this year would be breaking a promise Trenton made “to our hard-working job providers” who “need stability and a predictable business environment.”
KEEPING PROMISES
“Integrity and trust in our leaders are paramount as we continue to rebuild the image of our state,” said Tom Bracken, president, and CEO of the New Jersey Chamber of Commerce. “Not honoring commitments would cause investors, employers and business owners to lose confidence and respect in our government officials that is expected when they make major investment decisions.”
Bracken continued. “For those complaining about businesses not paying their fair share, even after the CBT surcharge expires, New Jersey will still be in the top four in the nation, at nine percent, in CBT rates. In addition, many New Jersey companies must now adhere to the new Inflation Reduction Act rules and will be paying a 15 percent corporate minimum tax, thus making tax relief from the sunset more vital.”
While Pennsylvania has recently enacted a significant corporate tax cut, New York Governor Kathy Hochul has committed to maintaining her state’s current corporate tax rate
Across the country, Republican governors and legislatures used the influx of federal pandemic aid to bolster their state finances.
“More than a year after Congress approved a $1.9 trillion coronavirus relief package, Republicans in nearly two dozen states have ratcheted up efforts to tap some of those funds for an unrelated purpose: paying for tax cuts,” reported the Washington Post. “The moves have threatened to siphon off aid that might otherwise help states fight the pandemic, shore up their local economies or prepare for a potential recession.”
I find the arguments of the For the Many NJ coalition, including dozens of unions, social justice and community-based non-profits calling on Trenton to extend the big business tax for another year to be disingenuous and smacks of fraud and greed.
For the Many NJ stated: “As we enter a budget season with lower revenues and a potential recession on the horizon, this is exactly the wrong time to be giving the most profitable corporations a $600 million tax cut,” the For Many NJ Coalition wrote. “Such a gift for corporations and their shareholders takes away resources from our schools and infrastructure and undermines funding for areas that promote opportunity for all: affordable housing, quality health care, reliable mass transit, and clean energy.”
For the Many NJ forgets that large corporations that make large profits, employ LARGE numbers of employees when times are good. That is what really creates more revenue for schools, affordable housing, quality health care, reliable mass transit and clean energy.
For the Many NJ is doing nothing more than seeking entitlements for certain groups through taxing the producers instead of looking at the overall picture where more money made by corporations and businesses, large and small means more money for everybody. For the Many NJ short-sighted view of keeping taxing everybody to serve certain groups is not only disingenuous but not equitable.
These corporations have already been enjoying huge profits and they’re doing just fine. This tax already exists – none of these companies have fled the state and are making tons of money.
“more money made by corporations and businesses, large and small means more money for everybody” – are we living in the same America? Income inequality and poverty are at record levels, while corporate profits and CEO compensation continue to skyrocket. Clearly that does not mean more money for everybody.
I have no idea where you’re getting this idea of “seeking entitlements for certain groups”. I suppose if what you mean by “groups” are millions of hardworking New Jerseyans who are struggling to get by, and “entitlements” are affordable healthcare, childcare, and education, then I’d have to agree.
These huge companies built their profits on the backs of good New Jersey workers and New Jersey infrastructure. They should pay their fair share in the CBT surcharge.