Home Tax Planning NJ Politics Digest: Budget Plan Could Give State the Highest US Corporate Tax Rate

NJ Politics Digest: Budget Plan Could Give State the Highest US Corporate Tax Rate

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The plan would hike the corporate business tax rate from its current 9 percent to 11.5 percent for companies with revenues from $1M to $25M, and to 13 percent for those earning more than $25M. Pixabay

Democratic legislative leaders on Tuesday began advancing their plan for a state budget that, among other things, would temporarily raise taxes on corporations instead of hiking the state sales tax or instituting a new “millionaires tax.”

Senate President Steve Sweeney said the corporate tax increase makes sense, since corporations were big beneficiaries from the recently approved Republican federal tax hike. He said individuals, including the state’s wealthiest, were hard hit by provisions in the federal plan that limits the deductions for state and local taxes and warned that high wage earners will flee the already highly taxed state if required to pay even more.

But as ROI-NJ reports, the plan pushed by Sweeney and Democratic Assembly Speaker Craig Coughlin could also give New Jersey another unwanted distinction—that of having the highest corporate tax in the country.

According to the report, the Democrat’s plan would boost the corporate business tax rate on C-Corps from its current nine percent to 11.5 percent for companies with revenues from $1 million to $25 million, and to 13 percent for companies earning more than $25 million. New Jersey, which currently has the sixth-highest corporate tax rate in the country, would fall only behind Iowa, which taxes large companies at 12 percent, but wants to lower that rate to 9.8 percent.

Sweeney, however, defended his plan, saying the GOP tax plan was a windfall for companies and that Democrats are merely trying to “go where the money is at,” according to the report.

Murphy, however, isn’t buying the legislature’s plan, saying its two-year sunset provision doesn’t provide a stable source of funding, while the higher rate will drive businesses—and the jobs they provide—away.

The governor, a millionaire who campaigned on a promise to protect the state’s middle class, contends residents won’t notice a hike in the sales tax back to its 2016 levels. The legislature had cut the sales tax that year as a way of placating residents following a 23-cent per gallon hike in the state’s gasoline tax. Murphy has said the gas tax will need to go up again this fall.

Murphy also says residents—who consistently rate the state’s high tax burden as a top problem facing New Jersey—won’t mind paying more if they feel they are getting their money’s worth in state services. His budget calls for more money for NJ Transit, school funding, free community college for low-income students and expansion of state pre-k programs. Critics, however, say Murphy’s plan to expand community college aid and pre-k programs are expenses that will only grow in coming years, putting the cash-strapped state in an even worse financial position.

The governor and legislature must agree on a budget by June 30 or face the prospect of a shutdown of state government.

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