Following are his prepared remarks:

"Good morning. Governor McGreevey's FY2003 state budget proposal assumes a staggering 64 percent increase in employer business tax revenues -- a one year increase of $711 million. To accomplish this increase, the Governor proposal goes far beyond loophole closings for the largest of New Jersey's employers. Instead his plan will impose new taxes on over 400,000 New Jersey employers, the vast majority of which are small businesses. Employers would include business entities presently exempt from paying corporation taxes, such as partnerships and LLCs.

"Governor McGreevey is proposing a new method of taxing New Jersey employers. Instead of a tax on net business profits, McGreevey's plan would impose three new taxes: a payroll tax, a property tax and a gross receipts tax. Under his proposal, an employer's total tax payment under this new scheme is up to 1 percent of gross income, up to$5 million in taxes.

"The significance of this shift from a tax based on profits or net income to a tax based on gross receipts or payroll value or property value is enormous. Today, an employer pays taxes based on his or her net income as reported on the federal tax return. This procedure, used by 46 other states, allows an employer to deduct the following IRS allowed business costs from taxable income: salaries, employee health insurance, education benefits, pension benefits, interest on business loans, repairs and maintenance, property taxes and community charitable contributions.

"The Administration's approach would disallow these deductions. In other words, employers would be taxed on every dollar of these deductions, whether or not the business makes a profit at the end of the day.

"No other state in the nation is so shortsighted as to tax up to $5 million from a money-losing company.

"Arguments supporting this change claim that only businesses not paying their fair share of taxes will be affected. Tell that to the small New Jersey manufacturer, based in Trenton, employing 103 people that would see its corporation business tax rise to $150,000 from the present $45,000. Pennsylvania is less than a three minute drive from Trenton. Why stay in New Jersey?

"Supporters of this change also claim that small business will be unaffected. Nonsense. The proposal exempts the first $200,000 of payroll from the new payroll tax. In a high wage state like New Jersey, this would only exempt firms with three or four employees. But even they could still face the new property tax, with its exemption of only $500,000 of property value.

"Employers with high sales volumes, high overhead and low profit margins will be crushed under this tax change. Retailers and manufacturers will be especially hard hit.

"And if you think it is only wealthy employers who will bear this burden, think again. Where are companies going to get the money to pay these new taxes if they have no profits? They are going to cut jobs. It will be the people who work at these companies who will ultimately pay the price for this counterproductive tax.

"Are there business tax loopholes that can be closed? Absolutely. The Governor was correct in saying that there are out-of-state companies selling products in New Jersey today that are not filing corporation business tax returns. The Division of Taxation has the ability to go after these companies. We encourage their efforts. Also, if New Jersey business taxpayers are moving business income to untaxed out-of-state affiliates, place a tax on these transfers.

"But these reforms are not being proposed today. According to the Budget in Brief, these reforms will wait a year. No, the bulk of the $711 million in employer taxes will come from businesses paying taxes on gross income, regardless of profits.

"Corporate tax reform like this should be driven by thoughtful policy consensus, not driven by a need to close an immediate budget gap. Over the past decade New Jersey has developed a national reputation as a state with a stable business climate. By painting New Jersey employers as tax cheats and by ignoring the high cost of doing business in New Jersey, including substantial property taxes ($3.1 billion) and payroll taxes ($1.2 billion), this budget proposal does a grave disservice to New Jersey's employer community. This slap-dash proposal will lead employers here and across the region to question whether New Jersey is a place to grow a business.

"On behalf of our 17,800 employer members, we urge you to reject unfair tax hikes and protect New Jersey's employees and employers."

For more information, contact:
Steve Wilson, 609-393-7707, ext. 245
Chris Biddle, ext. 227
 

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