News Release: June 12, 2002The Governor's plan to raise $1 billion in new business-tax revenues will impose a huge tax increase on many small and medium-size businesses that are already struggling to survive in a weak economy, the New Jersey Business & Industry Association has concluded after making a careful analysis of the tax plan legislation.
Under the Governor's plan, introduced into legislation as S-1556 (Kenny)/A-2501 (Sires, Roberts), a new Alternative Minimum Tax (AMT) will be applied to all C corporations.
"The AMT will impose a huge tax increase on small and medium-size businesses that don't use loopholes," said NJBIA Vice President Arthur Maurice. "Even small companies that are losing money will have to pay a large tax when they can least afford it."
"This is a tax increase on employers that are the backbone of this economy, the folks who create jobs, pay health benefits, pay their state and local taxes, and keep our economy humming. These employers are already struggling with a sluggish economy, double-digit healthcare inflation, and rising property taxes. This tax increase will hurt not only employers, but also their employees and the New Jersey economy."
Under the Governor's tax plan, all C corporations will be subject to the new Alternative Minimum Tax. They will be given a choice between an AMT of either 0.3 percent (three tenths of one percentage point) on their gross receipts or 0.6 percent (six tenths of one percentage point) on their gross profits (gross receipts minus the costs of goods).
Then they will be required to pay the new AMT or the existing Corporation Business Tax on net profits, whichever is greater.
Under the AMT, employers will no longer be able to deduct legitimate business expenses like wages and health benefits in calculating their tax liability. Because legitimate business expenses can no longer be deducted, the AMT will result in large tax increases for many small and medium-size businesses, NJBIA has determined.
The AMT will apply to all C corporations, but will exempt the first $1 million in gross receipts and the first $500,000 in gross profits. According to McGreevey administration estimates, this part of the tax increase will raise $240 million to $275 million.
"Governor James E. McGreevey said he did not want to hurt small businesses or businesses that already pay their fair share of taxes. Unfortunately, this provision does just that," Maurice said. "Legislators owe it to their constituents to take a good long look at this plan and remember-rhetoric aside, this is a tax increase."
With more than 18,000 member companies, NJBIA is the state's largest employer association. The vast majority of its members (85 percent) are small companies that employ fewer than 50 people.
For more information or to speak with individual companies in your coverage area affected by the tax increase, contact Chris Biddle at 609-393-7707, ext. 227, or Steve Wilson at ext. 245.
