New Jersey is one step closer to a major overhaul of its corporate business tax code.
This week, the State Senate's Budget and Appropriations Committee voted unanimously to approve a series of major business tax cuts that were first floated by Gov. Phil Murphy in February as part of his
The tax bill, since cleaved from the budget and moving through parallel approval, calls for a CBT surcharge instituted in 2020 in response to COVID-related budget gaps, to sunset at the year's end.
The 2.5% surcharge levied on corporate profits of over $1 million brought New Jersey's effective CBT rate to 11.5%, the highest in the nation, and had been extended annually while "the state's financial future was uncertain," the governor's office said.
Now, with the return of some semblance of economic stability, it was "fiscally responsible" to let the rate slip back down to its original level of 9%, Murphy's office said.
The bill would also permanently reduce the global intangible low tax income rate from excluding 50% of overseas earnings to excluding 95% of those earnings, referring
The CBT rate reduction would reduce New Jersey's revenues by roughly $1 billion by fiscal 2025 while the global rate change would cost a further $123 million annually, according
Both are losses officials hope to recoup in part through increased economic activity and the opening up of some additional revenues stream; if the bill is passed, some real estate investment funds and other investment companies will see certain industry-specific incentives protecting earnings end, opening those funds up to taxation by the state.
Thus far the bill has met limited resistance, primarily from rival Republican lawmakers who want a more drastic reduction of CBT, as well as advocacy groups, like the left-leaning think tank, New Jersey Policy Perspective, who are instead calling for
"This change would only benefit a select few highly profitable corporations, providing an average tax cut of $5 million to companies with more than $100 million in annual profits" the NJPP said in a report.
The plan has received a positive welcome from a wide swath of state Democrats as well as many of New Jersey's largest business groups, including the New Jersey Business & Industry Association.
NJBIA's president, Michele Siekerka, said the organization wanted to see the CBT "eliminated immediately."
"But we know that practically, that's not going to happen, so we're supporting this measure," Siekerka said. "Other states that have taken measures to bring down their corporate business tax have absolutely seen better economic recovery, and increased in state output, and so we would like to have New Jersey follow suit."
The budget committee approval sends the bill to the floor of the Democratic-controlled Senate for debate. Murphy's fellow Democrats also control the State Assembly.
If approved, the new provisions would take effect at the turn of the year.
