Says the proposal goes far beyond closing loopholes.
McGreevey seeking new corporate tax program
Many businesses and business groups are apprehensive about change in the state’s corporate tax policy and have expressed concern about the proposed plan. Art Maurice, vice president of the New Jersey Business and Industry Association, carried his group’s protest of the proposed plan in addition to testifying to members of the Legislature.
Mr. Maurice testified before a joint hearing of the Assembly Budget and Senate Budget and Appropriations committees early this month, urging legislators to vote against Gov. McGreevey’s proposal to increase corporation business taxes.
The NJBIA represents more than 17,000 businesses in the state.
"Gov. McGreevey’s fiscal year 2003 state budget proposal assumes a staggering 64 percent increase in employer business tax revenues a one year increase of $711 million," Mr. Maurice said in his testimony. "To accomplish this increase, the governor’s proposal goes far beyond loophole closings for the largest of New Jersey’s employers," Mr. Maurice said.
"Instead his plan will impose new taxes on over 400,000 employers, the vast majority of which are small businesses. Employers would include business entities presently exempt from paying corporation taxes, such as partnerships and LLCs." LLCs are limited liability corporations.
Mr. Maurice’s testimony claimed that an employer pays tax based on net income declared on a federal income tax return. The procedure allows an employer to deduct the Internal Revenue Service’s permitted business costs from taxable income, including: salaries, employee health insurance, education benefits, pensions, interest on loans, repairs and maintenance, property taxes and charitable contributions. He said the governor’s proposal would no longer allow for these sorts of deductions, taxing the money whether the company made a profit or not which he said was unfair.
He said the biggest point of resistance he has heard so far amongst his constituents is uncertainty.
"We don’t have a lot of details. The details are slight. There are some facts, and they indicate that there is going to be a massive tax increase," Mr. Maurice said in a later interview. "This plan is looking at more than corporations just closing loopholes. Other business entities, LLCs and S [corporations], would be subjected to the tax. This is a new tax. The fact that there is general uncertainty and a time deadline of June 30 involved has people nervous."
Mr. Maurice said a proposal has not been drafted for any legislators to even deliberate, causing more unease amongst some of the legislators he has spoken with and the business community, he said.
Mr. Maurice said there are tax loopholes which can be closed, such as finding out-of-state companies which are not filing corporation business tax returns. Mr. Maurice also suggested placing a tax on filings of business income to out-of-state affiliates.
"These are big changes which will affect the economy; and we’re in a recession. At the same time the business community realizes this is the governor’s first year and we want to work with him."