To The Readers Of The Metropolitan Corporate Counsel :
A lot has happened to the business community in New Jersey in the last year, much of it good news. The New Jersey Business & Industry Association (NJBIA) has been working with Governor Chris Christie and the Legislature on improving the state's business climate, which is leading to tangible changes in taxes, regulatory reform, and economic development. What's more, New Jersey businesses are noticing the difference.
In April, Governor Chris Christie signed two pieces of tax reform legislation that NJBIA had been pushing for many years. One enacts single-sales-factor tax reform, which eliminates what was commonly referred to as an investment tax. The other allows businesses that pay the gross income tax instead of the corporate business tax to offset losses between different income categories and allows losses to be carried forward for 20 years. The governor and the Legislature are to be commended for working together to make these policy changes a reality.
Single-sales-factor reform is important because it levels the playing field between in-state and out-of state companies. Prior to enactment of P.L.2011, c.59, New Jersey's corporate tax structure was based on three factors - sales, the number of employees and facilities in the state. As a result, a company with the same amount of in-state sales as an out-of-state company would pay more in taxes because of the employees and facilities it has in New Jersey. The new formula bases the tax on sales only. It makes sense not to penalize companies that choose to create jobs here and build here.
P.L.2011, c.60, meanwhile, will allow businesses such as LLCs, partnerships, S corporations and sole proprietorships, which pay income taxes, to deduct losses in one year from income in up to 20 future profitable years. Previously, this type of loss carry-forward was available only to companies that pay corporate business taxes.
The measure would also allow businesses that pay income taxes to offset a gain in one income category from a loss in another income category. For instance, a business could offset gains in an LLC with losses from a partnership. Previously, losses for these types of entities could only be used to offset income generated from the same type of business entity.
This change will make New Jersey's tax policies more competitive with other states, including New York and Pennsylvania, and will help move the economy forward.
These two measures are the latest initiatives in a bipartisan effort to improve New Jersey's business climate. They follow a series of comprehensive regulatory reform measures, and the changes have resulted in one-third fewer new regulations being proposed. The state also has a new property tax cap, capping property tax increases at two percent a year. And the state is getting its fiscal house in order by cutting spending, not raising taxes.
While no one can say for sure what is going to happen in the future, the state's CEOs believe New Jersey's economy is coming back and its business climate is improving. That's the main finding of the C-Suite Survey measuring the attitudes of Garden State CEOs, and it provides clear evidence that the pro-business actions of Governor Christie and the Legislature are paying off.
Businesses are already responding positively to the new direction. NJBIA recently partnered with the Edward J. Bloustein School of Planning and Public Policy at Rutgers University and Cushman and Wakefield to survey the attitudes of the state's CEOs. The C-Suite Survey, as it is called, found they were significantly more optimistic about the state's business climate and its economic prospects than they were in the fall of 2009, when the last C-Suite Survey was conducted.
In the survey, 32 percent said they plan to increase employment in New Jersey in the year ahead. In the 2009 survey, only 15 percent said they planned to increase employment. Seventy-four percent of respondents said they also expected revenues to improve in 2011.
Furthermore, 42 percent said they believe New Jersey's economy has improved over the past 12 months, while only 8 percent said it has gotten worse, and 59 percent say the state economy will improve over the next 12 months, while 11 percent said it will deteriorate. These represent the most positive responses in the survey's history.
What's really striking, however, is the change in the attitude of CEOs towards state government. Seventy-five percent said state government had become more responsive to the needs of business over the past six months. Only 30 percent of respondents expressed this sentiment when the survey was last conducted in the fall of 2009. Sixty-seven percent said New Jersey is fair-to-good as a place to do business, up from 51 percent 18 months ago, and 69 percent said New Jersey is fair-to-good as a place for business expansion, up from 48 percent.
Despite the tangible progress, this is still a high-cost state in which to operate a business, and more work needs to be done. But clearly, New Jersey is heading in the right direction.