New Jersey has the worst rated business tax climate in nation
A new report that ranks business tax climates across the country puts New Jersey at the bottom of the list for having the worst business tax climate of any state in America.
Janelle Fritts, a policy tax analyst for the Tax Foundation and co-author of the 2023 State Business Tax Climate Index, said all of the states that do poorly in the ranking “are states that have very complex tax codes and states that have very high rates, and New Jersey, of course, has both of those in almost every tax category.”
She said New Jersey is ranked worst because “it has the highest corporate income tax in the country at 11.5%. Its individual income tax is also very uncompetitive: you’ve got a 10.75% top rate on that one.
Fritts said New Jersey’s property taxes are sky-high.
“When we take an effective property tax rate, so that’s when we look at property tax collection as a percentage of owner-occupied housing values, New Jersey lands at 2.21%, which is the highest in the country.”
What needs to be done
“The big things that Jersey really needs to do are bringing down those rates even marginally, and also to consolidate some of the brackets. New Jersey has very complicated, both personal and corporate income tax brackets," she said.
She pointed out taxes aren’t the only thing people look at when thinking about starting a business or relocating, “but when the taxes are so high it can be a big part of the picture, and we are seeing business location decisions and where people move, taxes do affect that.”
Fritts said a noticeable trend involves people moving out of high-tax states to areas where taxes are lower.
“If New Jersey wants to remain competitive with the rest of the country, as a lot of states are actually bringing down their rates, New Jersey would need to bring down some rates to keep up with the competition,” she said.
A sliver lining
She pointed out the one good thing about being rated worst is that there are plenty of things Jersey can do to improve its standing.
“One is doing full expensing for capital investments,” she said. “That means letting business owners who buy anything in the capital investment area to expense that totally in the first year.”
When it comes to the Business Tax Climate Index, she said “states that do well have obviously lower rates, broad bases and very simple systems. All across the board, New Jersey has very high rates compared to its neighbors and the country as a whole.”
The states with the best-rated business tax climates in the Index are Wyoming, South Dakota.
Jersey is ranked worst, followed by New York and California.