Measures Will Cut Taxes for Small Businesses, Enact Single-Sales Formula
TRENTON – Two Democratic business tax cut measures that will help make the state’s business climate more pro-jobs and pro-economic growth are now law.
The bills were a second attempt by Democrats to enact meaningful business tax cuts to spur economic growth and job creation across the state. Prior versions of the new laws were both vetoed by the governor, only to resurface four days later in his budget address.
“Democrats insisted on these ideas because they were the right thing to do for our state and our business community to rebuild confidence and create jobs,” said Senate President Steve Sweeney (D-Gloucester/Cumberland/Salem).
The first measure will help small businesses that do not file through the corporate tax code by giving them many of the same benefits enjoyed by their larger counterparts. Under prior tax law, state gross income taxes were calculated through 16 separately defined categories of income. And, unlike the federal tax code and the tax laws of 48 other states, New Jersey law did not permit small business filers to carry-forward operating losses. The new law consolidates four income categories, and allows a 50-percent “cross-netting” of gains or losses from one category of income to another; the change could be one of the largest small business tax cuts in state history.
The law was sponsored by Senate Majority Leader Barbara Buono (D-Middlesex) and Senator Linda Greenstein (D-Middlesex/Mercer).
“When a big business loses money, the corporate tax code offers them a potentially life-saving break, yet small business owners have no such protection,” said Buono. “This tax disparity becomes even more harmful to the small businesses we will need to grow our economy. Our taxes need to be fair to businesses of all sizes, and not stick to a mistaken model of ‘bigger is better.’ It’s simply a shame that the governor decided to play politics, and made small businesses wait so needlessly for a tax cut they so desperately need.”
“Small businesses are the lifeblood of our communities and economy, and we need to protect them,” said Greenstein. “By moving swiftly to make this change law, we are sending a message to all small businesses that tomorrow is going to be better.”
The second Democratic bill alters the state’s corporate business tax formula to implement a “single sales fraction” to level the playing field for New Jersey businesses by removing consideration of a company’s physical in-state assets from its tax liabilities – a system that, under prior law, benefited out-of-state companies.
The new law – sponsored by Senators Jim Whelan (D-Atlantic) and Fred Madden (D-Gloucester/Camden) – is virtually identical to the legislation vetoed by the governor.
“New Jersey needs to be attractive to business, and having a law on the books that actually benefited corporations that stayed away had been counterintuitive and counterproductive,” said Whelan. “Now we can truly make New Jersey a welcoming home for business.”
“Businesses had been asking for this relief for years, and its good that we can finally make it a reality,” said Madden. “The only thing worse than making New Jersey businesses wait so long for this relief is the fact that it was allowed to stay on the books for so long to begin with.”