When it comes to a competitive business climate, New Jersey ranks dead last in the region. That’s according to the New Jersey Business and Industry Association. It compared six individual business costs with those of nearby states and concluded New Jersey’s at the bottom and could fall even further behind if lawmakers vote to raise the minimum wage and impose a tax hike on corporations and millionaires. NJBIA President and CEO Michele Siekerka sat down recently with business correspondent Rhonda Schaffler.
Schaffler: Michele, the NJBIA’s concerned about recent mandates from Trenton and there are also proposals being considered during the budget season, whether it’s a $15 minimum wage or a millionaire’s tax. Can you tally up what the Murphy administration’s mandates are costing businesses in New Jersey?
Siekerka: Rhonda, you hit on the point exactly. It’s a cumulative impact. We have mandates on businesses that are going to cost businesses money. We have proposals for increases in taxes, whether it will be a millionaire’s tax or corporate business tax and on top of that, we have bills that were just signed yesterday that are going to increase the cost for energy users in the state of New Jersey. The energy alone we’re talking about $3 billion in nuclear subsidies. On top of that, about a $300 million package on clean energy and then we hear the administration also talking about going back into RGGI which is going to be an additional cost. You stack that on top of a millionaire’s tax, which is a significant concern to New Jersey’s small business, we have 5,000 businesses in the state of New Jersey who will be impacted by a millionaire’s tax, you put that on top of a corporate business tax, which is New Jersey’s largest companies in the state of New Jersey who are already stagnating in growth, these are things that should have our attention and this is a very deep price tag that we’re talking about.
Schaffler: So what kind of response are you getting from lawmakers in Trenton? I know you have been raising these concerns.
Siekerka: Well, the response so far is that we understand that there’s concern, however what we hear from our policy makers is that we have a revenue problem in the state of New Jersey. I want to suggest, number one we need to step back and look at our spending issues in the state of New Jersey. We need to first and foremost prioritize that spending toward the things that are structurally broken in the state of New Jersey versus talking about new spending. Which, in fact, many of the proposals in front of us today are about new spending. Let’s step back. Let’s get our pension in order, let’s get our funding for state education in order. Let’s get our transportation in order before we talk about new spending in the state of New Jersey.
Schaffler: Perhaps to prove the point, the NJBIA has released an analysis and you basically looked at New Jersey’s business competitiveness compared to some other states that surround New Jersey. What have you found, what have you shared?
Siekerka: We looked at six different factors that have everything to do with taxes and cost of doing business and living in the state of New Jersey and we compared that across seven states in the region and we ranked 7th, dead last. And we were dead last by far, Rhonda. That’s before any of these proposals. So, right now we are an outlier and now we’re talking about increasing taxes and cost of doing business which will make us an extreme outlier. For this we should be concerned.
Schaffler: So, one thing the NJBIA has done is called for comprehensive tax and regulatory reform. What exactly does that mean, comprehensive tax reform? Because, as you pointed out, there are new spending priorities with the Murphy administration. So there are ways the Murphy administration will want to pay for that.
Siekerka: Yes. We need to step back and do some comprehensive planning in the state of New Jersey. We’re not very good at planning all the time. What happens is, we come out with one-off legislation without considering the cumulative impact or comprehensive impact of that legislation. We call on our policy makers to take a pause right now, to step back on new mandates and new spending. Let’s wait. We have two task forces working right now. Senate President Sweeney has a task force addressing tax revenue in the state of New Jersey, and Gov. Murphy has a committee that is looking at jobs and opportunities for job creation in the state of New Jersey. Planning would suggest we step back and we wait to get the responses and the recommendations from those task forces, learn from that, have stakeholder engagement, come up with a strategic plan for the state of New Jersey and then in the execution should come legislation that supports the priorities that come out of those recommendations, not the reverse.
Schaffler: But Michele, the timing might be off ahead of the state budget deadline. It’s unclear that those proposals will be formulated.
Siekerka: Yes, that is a challenge. To that we would say then this year’s budget needs to be a status quo. Let’s step back then and do our planning for next year. We can’t in the 11th hour just come in and raise revenue on anything that we think we can raise revenue on for the purpose of increasing spending in the state of New Jersey. New Jersey’s taxpayers are the most taxed in the nation today. We cannot afford to go to a super premium cost for our services in the state of New Jersey. Our taxpayers today are on the brink. We need to bring them back from the brink and not push them over the edge.
Schaffler: Michele, there are, though, some opportunities, are there not, for small businesses? Whether it’s an impact from the sports betting or also the fact that the SBA recently said that it has issued a record amount of small business loans in the state. So, people do want to expand here.
Siekerka: There’s absolutely discussion about expansion. In fact, we’ve been very thrilled over the last four years we’ve seen slow and steady growth in the state of New Jersey. So, what you have now is you have businesses with their hand frozen on their wallet because they’ve got all these mandates staring them down on top of proposals for tax increases. When I talk to our members today, I hear great concern. They’re waiting to see what the result of this budget process is going to be. I hear companies talk about creating jobs outside of the state of New Jersey. That we can’t have. We can’t have stagnation. We need to get this economy kicking and moving fast.
Schaffler: What about the fact that there was some benefit to businesses from the federal tax cut perhaps opening a door for a corporate tax increase?
Siekerka: Yes, someone suggested that corporations in New Jersey got a windfall from the federal tax reform. I would suggest to you those corporations have done exactly what they were asked to do with that money. In fact, we know not just in New Jersey, but nationally the largest percentage of that money is being put into capital expenditures, right back into the companies. Thirty-nine percent of companies who received a return from the federal tax reform put that into capital spending. That far exceeds payback to shareholders and any other way that they’re spending that money. Here in New Jersey, we know our own companies have provided bonuses and salary increases as well as created public funds so that they can again be good corporate citizens giving back to their communities.