New Jersey employers will pay about $325 million more in business taxes under the fiscal year 2005 state budget to be unveiled today by Governor James E. McGreevey, an analysis by the New Jersey Business & Industry Association found.

"This is supposed to be a 'good news' budget where revenues are up and spending will be increased. But there's no good news here for the business community," NJBIA President Philip Kirschner said. "Spending is increased and it is New Jersey's employers who will be footing the bill."

Kirschner said two items in the Governor's budget would directly impact business taxes if enacted-the first is the continued suspension of Net Operating Loss (NOL) deductions, the second is a decoupling from an accelerated federal depreciation tax deduction for investments in new equipment. This is on top of the doubling of the Corporation Business Tax (CBT) enacted in 2002.

"Everyone should be concerned about these provisions," Kirschner said. "They will discourage companies from hiring new workers and investing in new equipment. And these provisions come on top of the $2 billion Corporation Business Tax (CBT) increase imposed on employers in 2002."

The NOL provision allows businesses to deduct losses from one tax year from years in which the company shows a profit. NOL helps struggling manufacturers weather economic downturns by offsetting their losses over several years.

In 2002, as part of the $2 billion CBT hike, the State suspended the net operating loss provisions for two years-meaning businesses with losses in prior years have not been able to deduct them in tax returns for the 2002 and 2003 tax years. This suspension was supposed to be temporary, allowing business to deduct these losses in the 2004 tax year.

However, the Governor's proposed budget is expected to continue the NOL suspension at a cost of approximately $275 million to New Jersey companies. Continuing this suspension will hurt manufacturers who are struggling to overcome the effects of a weak economy. It will hamper their ability to create jobs. Manufacturers were the hardest hit of all sectors in the recession and this action victimizes them again.

NJBIA Budget Address

Similarly, New Jersey will not allow companies to depreciate new equipment at the same rate as the federal government. A new federal law aimed at stimulating business investment, will take effect in 2004 and will allow companies to deduct up to 50 percent of the depreciation of new equipment in the first year. However, the McGreevey budget would not allow companies to use the same incentive on their state tax returns, costing employers an estimated $50 million a year, thereby discouraging business investment in new equipment.