“From my first day in office I rejected the false choice that you are either for business or for hard-working families. We can be more competitive and more compassionate. A stronger economy builds a fairer New Jersey,” Gov. Phil Murphy said during his annual budget address last week in Trenton. “That’s how we retain and attract the businesses of the 21st century and beyond. By being strategic, by living our values, and by staying true to our word.”
That was the message as Murphy unveiled a $53.1 billion spending proposal, which he says continues his vision for building the “Next New Jersey,” centered on the pillars of affordability, responsibility and opportunity.
“Everything in this budget – and everything we seek to do – is about growing and strengthening the middle class,” Murphy said. “About providing more opportunity – and more affordability – for hardworking families. And about building that Next New Jersey that uplifts each of us and works for all of us.”
Some of the major highlights of the budget proposal include:
- A sunset of the Corporate Business Tax (CBT) surcharge
- $10 billion in surplus to guard against an economic downturn
- A full pension payment of $7.1 billion
- An additional $2.35 billion Fiscal Year 2023 deposit in the Debt Defeasance and Prevention Fund, for a total investment of over $11 billion
- $2 billion for the second round of the ANCHOR Property Tax Relief Program
- Doubling the Child Tax Credit, enabling families with young children to receive up to $1,000 per child
- Expanding the Senior Freeze property tax relief program to those with incomes up to $150,000
The CBT surcharge is a major headline for the business community as groups have been pushing for that 2.5% surcharge to expire at the end of the year. Murphy had signaled support earlier this year and confirmed that decision to let it sunset during the budget speech.
“We hear from the business community that allowing this surcharge to lapse will mean more money for them to create jobs, to invest in new and more efficient equipment, to lower costs to consumers, and to be able to stay here,” said Murphy. “So, just as they’ve trusted us to keep our word in letting this temporary surcharge expire, I’m expecting them to keep theirs with this revenue.”
That decision was applauded by the top business leaders and groups around the state.
“The governor’s position on this is correct. It will help make the state more competitive and more affordable,” said Tom Bracken, New Jersey Chamber of Commerce president and CEO. “It will also demonstrate that our leaders honor their commitments, which results in the reliability that businesses seek. Still, even after the CBT surcharge expires, New Jersey will have the fourth-highest CBT rate in the nation, which should be targeted for further reductions.”
“New Jersey has been a national outlier in this space for far too long, which has put our largest employers at a competitive disadvantage,” said Michele Siekerka, New Jersey Business & Industry president and CEO. “And while this surcharge was always supposed to be temporary, we recognize the sunset of a tax is never a given. So, it is appreciated.”
Siekerka echoed Bracken’s point that the Garden State will still have the fourth-highest CBT rate, as well as the highest in the region without the surcharge.
“We do believe a long-term, comprehensive plan to further reduce our CBT is an appropriate discussion worth having and something we will continue to strongly advocate for,” said Siekerka.
“The Chamber of Commerce Southern New Jersey was extremely pleased to hear Gov. Murphy commit to no new taxes or fees in the FY2024 state budget address, as well as declare that he will honor the agreement to allow the 2.5% Corporate Business Tax surcharge to expire,” said Christina Renna, president and CEO at CCSNJ. “This surcharge, enacted during the governor’s first year in office, has been levied on top of the state’s already extremely high CBT tax rate of 9%. The CCSNJ is thankful for the governor’s commitment to seeing the surcharge sunset and looks forward to working with the administration on a possible CBT reduction in the future, which will make the state more competitive and positioned for economic growth.”
And while many groups and leaders support that CBT sunset, as well as other budget initiatives, such as the full pension payment, debt defeasance, increased school funding, and more, there are still concerns about business affordability in the state.
“The governor’s budget offers insufficient improvement to our business climate and will not reduce resident’s property taxes,” said Regina Egea, president, Garden State Initiative. “The proposal to expire a six-year business tax surcharge is a tacit admission that business taxes are an important factor to retaining and luring investment in our state.”
Another point of contention centers on an issue created by the pandemic and left lingering since the last budget cycle: replenishing the Unemployment Insurance Trust Fund, especially with the backdrop of such a massive surplus.
“The small business community in the Garden State are disappointed that Gov. Murphy failed to even acknowledge the precarious state of New Jersey’s depleted unemployment trust fund, which could result in higher costs and taxes for employers,” said Eileen Kean, state director, National Federation of Independent Business, New Jersey. “Using federal COVID funds to replenish the billion-dollar shortfall caused by pandemic closures is a fair and common-sense solution that most states in the country have followed. Instead, Gov. Murphy is placing this future monetary burden on our Main Street and neighborhood business owners. As local job creators continue to navigate unprecedented economic headwinds, NFIB remains committed to working with the legislature to address this deficit in a bipartisan fashion when they present their budget to the governor in June.”
Bracken concurred about the UI issue, stressing that the surplus could be used to launch grant programs to help the business community.
“Missing from the budget – which includes a $10 billion surplus – are vital programs the business community has been seeking for some time. For instance, over the past several years, the New Jersey Chamber of Commerce has been calling for the creation of a grant that would provide working capital to entrepreneurs and business owners in every industry and region. We should use the surplus to finally make that a reality,” said Bracken. “This is also an opportunity to use the surplus to replenish the state’s Unemployment Insurance Fund, which many states have done, instead of through business payroll tax increases. These ideas should be seriously examined during upcoming budget discussions.”
“We also continue to seek unemployment insurance tax relief for our small businesses,” said Siekerka. “On July 1, those employers will be hit with another $300 million-plus payroll tax increase for a third straight year – part of a nearly $1 billion tax increase overall. Given that the UI fund depletion was the result of COVID closures and no federal COVID relief has been provided to these businesses, given the strong support for UI relief on both sides of the legislative aisle, and given New Jersey’s large surplus, we believe the governor should do what is right and provide at least some relief to what he himself has called the lifeblood of our economy.”
Siekerka also pointed out that the ANCHOR program does not directly help New Jersey businesses. Last week, Murphy announced that nearly 1.7 million New Jersey homeowners and renters applied for the first round of ANCHOR.
“While the proposed budget does aim for affordability, we do believe more can and should be done to address affordability for small- and mid-sized businesses,” said Siekerka. “As an example, the extension of the ANCHOR property tax program – which is helpful to residents and renters – again excludes businesses which pay nearly half of New Jersey’s property taxes.”
Ralph Albert Thomas, CEO and executive director, New Jersey Society of Certified Public Accountants, said his group was disappointed as well about the UI and small business affordability issues as well.
“NJCPA members serve tens of thousands of businesses and individuals. They are on the front lines of the state’s economy, in the trenches with the people who make the thousands of decisions every day, big and small, that shape New Jersey’s economic climate,” he said in a statement. “Our members are, by and large, practical and realistic. They know that the goal of the budget should be to achieve balance for business and taxes amid competing priorities throughout the state.”
A few other notable items in the budget, especially for the business community, include: the creation of a $100 million Boardwalk Fund to help strengthen shore towns; a new $100 million initiative to preserve affordable housing and develop workforce housing initiatives in cities; more than $50 million toward growing the green economy; $50 million in continued support for the Main Street Recovery Program; the creation of an Urban Investment Fund to support arts and creations of parks and gardens, among other urban infrastructure; and $6 million in grant funding toward employee ownership and supply chain diversity efforts, which NJBIZ reported exclusively before the budget address.
“The Chamber is supportive of measures proposed by Gov. Murphy to assist business owners in urban areas hit hard by the pandemic, as well as programs that revitalize New Jersey’s main streets and downtowns,” said Bracken. “We back initiatives that support businesses in our shore towns since they contribute so much to the state’s overall economy. And we applaud the governor’s announcement to provide parents with increased child care tax credits, which will enable many parents to get back to work and help ease the workforce shortage.”
“The CCSNJ was elated to learn more details on the new $100 million Boardwalk Fund. This much-needed program will partner with shore towns and counties to ensure that boardwalks get the attention they need to be repaired and rejuvenated,” said Renna. “In South Jersey, specifically in municipalities like Atlantic City and the Wildwoods, these funds are extremely welcome to assure local boardwalks are safe and enjoyable tourism destinations.”
When he spoke about the Boardwalk Fund, which was first mentioned during the State of the State Address, Murphy said the goal was to ensure that the wooden main streets he described as the backbones of those shore communities remain just that.
“The Boardwalk Fund will match county and local investments, so our shore communities can do more with their money while also taking more of the load off the shoulders of local property taxpayers,” Murphy said.
Now, the real fun starts as the budget process in Trenton gets underway in earnest, as lawmakers begin hearings and debate, and the key stakeholders advocate for their priorities and positions.
“In service to everyone who sent us here, let us join together as we shape this next budget and commit to this – the Next New Jersey is where opportunity grows, where rights are protected, and where we fight for each other, not with each other,” said Muphy as he closed out his speech. “And most of all, let us continue making New Jersey the state where hard work pays off.”
“NJBIA looks forward to working with Gov. Murphy and the Legislature to ensure the temporary CBT surtax sunsets per statute, that no new taxes and fees remain as proposed, and to work on further ways to make New Jersey businesses more competitive,” said Siekerka.
“As is our practice, the CCSNJ will carefully review the governor’s budget document, deliver testimony at public hearings, and look forward to providing the administration and state policymakers with our feedback,” said Renna.
“If Gov. Murphy wants to create a ‘next’ New Jersey, simply doing more of the same as in previous budgets will make the change difficult,” said Bracken. “More aggressive actions are needed to improve our image and the way our citizens think about the state. Additional support for the business community will do just that. With a $10 billion surplus, strategic investments can and should be made.”