Would Give Entrepreneurs Equal Treatment as Larger Corporations, Including Ability to Balance Gains and Losses
TRENTON – Legislation Senator Barbara Buono sponsored to provide sole proprietors and other small business owners with a tax cut by requiring the tax code to treat them the same way as it does larger corporations was today released by the Senate Budget and Appropriations Committee.
Under current law, New Jersey’s personal gross income tax is calculated through 16 separately defined categories of income. However, unlike the federal tax code and the tax laws of 48 other states, state tax law does not permit filers who generate income from different types of businesses to offset gains derived from one business entity with losses sustained from another.
Buono’s bill (S-1540) would consolidate four of those income categories to allow “cross-netting” of gains or losses from one category of income to another.
“While our tax law allows corporations the breaks they need to weather hard times and maintain employment, small employers who are not corporations are not given the same chance to survive,” said Buono (D-Middlesex). “Many, if not most small employers lose money in their early years, making this disparity even more harmful to the entrepreneurs we rely upon to create the businesses we need to grow our economy. The state’s desire for tax revenue today should not come at the cost of tomorrow’s jobs and economic growth.”
Buono said the bill would give small business owners the same ability to recoup losses over 20 years that large corporations currently enjoy. She said the change would encourage entrepreneurs to invest in and establish new businesses by allowing them to balance the losses from those ventures with the gains from their established, profitable entities. If enacted, the cut could potentially be the largest small business tax cut in state history.
“Changing tax policy can spur investment, job retention and growth, but only if it is done wisely,” said Buono. “A direct tax cut for small businesses will do much more to reinvigorate the economy than cutting taxes for wealthy individuals with the hopes that the benefits trickle down, which they rarely if ever do.”
The bill also is sponsored by Sen. Steve Oroho (R-Sussex/Hunterdon/Morris).
The measure was unanimously released and now is poised for a vote in the full Senate.