Eric Scott’s Analysis: Proposed Business Tax Hike Would Put New Jersey at Competitive Disadvantage

Nothing happens in a vacuum.

As Gov. Phil Murphy and leading Democrats consider a new business tax to raise $1 billion or more for New Jersey Transit, New York has rejected calls to increase its 7.25 percent tax on businesses, and Pennsylvania is planning to drop its corporate tax rate to 4.9 percent, according to the New Jersey Business & Industry Association (NJBIA).

Farther away, North Carolina and Indiana have grown employment and wages with a lower tax rate. North Carolina's is 2.5 percent, and Indiana's is 4.9 percent.

Meanwhile, if Murphy's Corporate Transit Fee is approved, New Jersey will have the highest corporate tax rate in the United States at 11.5 percent. And the next highest one isn't even close.

How can New Jersey compete for business and jobs when neighboring states provide more welcoming environments? And what effect would it have on existing businesses?

It would mean New Jersey businesses would have less money to invest in employees, products, and facilities. Many companies that would pay the new tax are chief creators of middle-class jobs. Plus, those in southern and western New Jersey likely wouldn't experience the benefit of a solvent New Jersey Transit.

On top of that, many companies can utilize remote workers or may find that entry-level employees prefer to live in a state with a lower cost of living than New Jersey.

Neighboring states already are trying to lure New Jersey companies away. A corporate tax rate hike would only make that easier to do.

To learn more and encourage our leaders to do better for business, visit njbia.org/dobetterforbusiness.

Brought to you by New Jersey Business & Industry Association (NJBIA).