Measures Would Cut Taxes for Small Businesses, Enact Single-Sales Formula; Sweeney: Governor’s Shortsighted, Politically Motivated Vetoes Won’t Stand In Way
TRENTON – The Senate today passed two Democratic business tax cut measures that will help make the state’s business climate more pro-jobs and pro-economic growth.
The bills are 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 measures were recently vetoed by the governor, only to resurface four days later in his budget address.
“We are not going to allow the governor’s shortsighted and politically motivated vetoes to stand in the way of providing real tax relief for our business community,” said Senate President Stephen M. Sweeney (D-Gloucester/Cumberland/Salem). “Democrats moved these measures the first time because they were the right thing to do. They still are.”
The first bill (S-2754) would 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. Currently, state gross income taxes are calculated through 16 separately defined categories of income. However, unlike the federal tax code and the tax laws of 48 other states, New Jersey law does not permit small business filers to carry-forward operating losses. The bill would consolidate four income categories, and allow a 50-percent “cross-netting” of gains or losses from one category of income to another. The cut could be one of the largest small business tax cuts in state history.
The bill is sponsored by Senate Majority Leader Barbara Buono (D-Middlesex) and Senator Linda Greenstein (D-Middlesex/Mercer). Buono was prime sponsor of the initial bill the governor vetoed.
“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 we have to come back to re-pass a tax cut that small businesses need.”
“Small businesses are the lifeblood of our communities and economy, and we need to protect them,” said Greenstein. “By moving swiftly, we are sending a message to all small businesses today that tomorrow is going to be better. This is tax relief that should have been signed immediately.”
The second Democratic bill would alter 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 current law, benefits out-of-state companies.
The measure – 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 benefits corporations that stay away has been counterintuitive and counterproductive,” said Whelan. “The governor’s veto notwithstanding, we’re moving ahead to make New Jersey a welcoming home for business.”
“Businesses have been asking for this relief for years, and its shameful that the governor pulled the rug out from under them just when they thought this tax cut was finally going to become reality,” said Madden. “The only thing worse than making New Jersey businesses wait for this relief is the fact that it was allowed to stay on the books for so long to begin with.”
Both bills were passed by unanimous 39-0 votes. Both of the original versions of the measure (S-1540 and S-1646, respectively) also were passed unanimously.
The bills – also being voted on today by the Assembly – will head to the governor pending Assembly approval.