In his first budget address to the State Legislature, Governor Jon Corzine on March 21 called for a mix of tax hikes and spending cuts to close a deficit of more than $4 billion in the budget for fiscal year 2007, which begins July 1. Corzine's proposed $30.9 billion budget would increase spending by $2.6 billion over current levels, mostly in court-mandated spending increases in education and formula-driven increases to State pensions and benefits. Next, the Assembly Budget Committee and the Senate Budget and Appropriations Committee will hold hearings throughout the State before drafting their budget bills sometime this spring.
For the business community, the proposed budget contains good news and bad news. The good news is the Governor proposed no suspension of net operating loss (NOL) deductions, no extension of the alternative minimum assessment (AMA) on corporations, and no diversion from the State's Unemployment Insurance (UI) fund.
NOL deductions allow businesses to deduct losses suffered during unprofitable years from taxable income in profitable years. NOLs help employers undergoing large expansions or other expensive capital improvement projects because they can deduct the costs over several years. Similarly, new start-up companies rely on NOL deductions to help them through the first few unprofitable years. NOL deductions were first suspended in 2002. The suspension ended January 1, making this year the first year since then in which employers will be able to take the full deduction.
Similarly, many employers have been struggling under the AMA, which taxes a company's gross receipts and prohibits deductions for legitimate business expenses like employees' wages, health benefits, and utilities. The AMA is scheduled to expire July 1. The NOL deduction suspension and AMA have cost employers more than $1.5 billion in higher taxes over the last four years. No other state in the nation imposed these taxes on business. NJBIA is pleased the Governor has chosen not to revive these anti-competitive tax hikes to balance the budget.
There are some tax hikes in the budget, however. The Governor has proposed adding a 2.5 percent surcharge onto the Corporate Business Tax (CBT) to raise about $60 million in new tax revenue. NJBIA opposes the surcharge. Additionally, Corzine proposed increasing the sales tax to 7 percent from 6 percent and expanding it to items that were not taxed in the past, such as Internet downloads, shipping and handling, landscaping, and health club fees. He also proposed increasing the water tax to 4 cents per 1,000 gallons. NJBIA opposes the water tax increase as well.
NJBIA is also pleased the Governor does not want to divert UI fund contributions. Over the last 12 years, the State has diverted $4.7 billion in payroll taxes away from the UI fund, leaving its balance dangerously low today.
NJBIA will be working hard to preserve the tax savings in the budget while opposing some of the new taxes. We will also work with the Legislature to find additional areas to cut spending. Contact Art Maurice at ext. 247 for more information.
Transportation Trust Fund Bill Sent to Governor—The Senate on March 20 gave final legislative approval to Governor Jon Corzine's plan to replenish the State's Transportation Trust Fund (TTF) without raising the gas tax. The Governor is expected to sign the bill, S-1470 (Lesniak)/A-2813 (Wisniewski) . The measure would refinance the trust fund's existing debt, freeing up about $105 million a year; add another $78 million a year by constitutionally dedicating all of the existing 10.5-cents-per-gallon gas tax (right now, only 9 cents goes to the fund); and add another $12 million a year from new toll road revenues.
The TTF is the main source of funding for road and public transportation construction. Without this legislation, all revenues going into the TTF would be used to pay off bonds used in past projects, leaving no funding for future road construction projects. NJBIA supports the bill. For more information, contact Frank Robinson at ext. 225.
Meet the Decision Makers Series Starts April 12—When a new Governor is elected, a whole new group of players comes to Trenton . That's why NJBIA is sponsoring four "Meet the Decision Makers" breakfasts so you can get to know the key members of Governor Jon Corzine's cabinet and staff. Each breakfast will begin with registration at 7:45 a.m. and be held at Forsgate Country Club, Monroe Township , just off NJ Turnpike exit 8A. The cost to attend each breakfast is $69 per person for NJBIA members and $105 for nonmembers. For more information, contact Stacy Wichner at ext. 213. To become a sponsor, contact Sherry Esteves at ext. 219. The events are:
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