Governor Jon Corzine and Assembly Democrats remained deadlocked over a one-cent increase in the State sales tax as the State's July 1 constitutional deadline for approving a balanced budget approached. The Assembly Appropriations Committee canceled a June 28 vote on several alternatives to the Governor's sales tax increase and was expected to meet again on June 30. The Senate Budget and Appropriations Committee, meanwhile, is scheduled to take up several narrow tax and fee increases, including some backed by Corzine, on June 30.

The budget debate contains good news for the business community. So far, the legislators have not tried to alter Governor Corzine's proposals to reinstate net-operating-loss deductions (NOLs), eliminate the alternative minimum assessment (AMA) portion of the Corporation Business Tax (CBT), lower the corporate income tax on S corporations or eliminate the diversion of employers' contributions to the Unemployment Insurance (UI) fund. Retaining these items is a top priority of NJBIA. A proposed tax on hospital beds and an increase in the water tax appear to be off the table. NJBIA opposed both tax increases.

In March, Governor Corzine proposed a $30.9 billion spending plan that would increase the sales tax by a penny to seven cents, raising an additional $1.1 billion. He also proposed a temporary 2.5 percent surcharge on corporations' CBT tax liabilities that would raise an additional $60 million per year. The CBT surcharge would be in effect only for fiscal years 2007, 2008 and 2009.

In an effort to avoid an increase in the sales tax, some Assembly Democrats proposed several alternative tax increases instead. The most controversial is, A-4713 (Greenwald, Roberts), which would increase employee payroll taxes for Temporary Disability Insurance. Employees currently pay 0.5 percent on the first $25,800 of gross income for TDI. A-4713 would increase that to 0.5 percent on the first $94,000 of gross income. A-4709 (Caraballo) , which would delay for two years the scheduled phase-out of the transitional energy facilities assessment (TEFA), costing consumers $45 million a year on their energy bills, was also introduced. TEFA was supposed to expire several years ago, but legislators keep reinstating it. Rounding out the revenue side of the Assembly plan is A-4711 (Roberts, Diegnan) , which would keep the sales tax at 6 cents but expand it to computer design and consulting services, customized software, security services, and a host of other previously untaxed services. The Assembly would also increase the CBT surcharge to 3.5 percent, through A-4706 (Roberts, Watson Coleman) . NJBIA opposes these measures.

No spending plan has been introduced in either the Senate or Assembly. The Senate Budget and Appropriations Committee was scheduled to take up the CBT surcharge, S-1987 (Kenny) , and the elimination of TEFA phase-out, S-1991 (Smith, B.) , on June 30. The State constitution requires legislators to enact a balanced budget by July 1. Failure to do so could lead to a State government shutdown of all but essential services. For more information, contact Art Maurice at ext. 247.

Assembly Votes to Ease Regulatory Burden for Small Business—NJBIA-backed legislation that would ease the regulatory burden for small businesses was unanimously approved by the full Assembly on June 26. A-2327 (Chivukula) would make several changes to the way State agencies promulgate rules that affect small businesses. It now heads to the Senate for consideration.

The New Jersey Regulatory Flexibility Act already allows simplified reporting requirements for some small businesses. A-2327 would expand the definition of small businesses to include those with annual sales of less than $6 million, regardless of the number of employees. Only businesses with fewer than 100 employees are now considered small businesses.

The bill also would require agencies to include simplification and consolidation of reporting requirements for small businesses when adopting or revising regulations. Finally, the bill would grant small businesses adversely impacted by a regulation the right to seek judicial review. Small businesses could petition the Appellate Division of the Superior Court within one year of final adoption of the rule, and the court would be able to order the agency to rewrite the rule or defer enforcement of the rule on small businesses. For more information, contact David Brogan at ext. 236.

Register by contacting Stacy Wichner at 609-393-7707, ext. 213, or download the fax-back event registration form. To become an event sponsor and gain great exposure to business leaders for your company, contact Sherry Esteves or ext. 219.