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Assembly Panel Wants to Keep Businesses, Jobs from Moving to Neighboring States

Experts tell committee NJ needs lower taxes, better training programs, more economic incentives if it wants to stop losing jobs to New York, other neighbors

NYC-NJ

With a new chairman and a roster consisting of all but two new members, the Assembly Commerce and Economic Development Committee is working to bring more business investment into New Jersey.

What they’re learning as they ask top representatives from the state’s business and education sectors is this: Without prolonged and decisive action to reduce certain taxes and increase training programs and economic incentives, New Jersey’s economy will continue to be ravaged by neighboring states stealing business from the Garden State.

Other states --New York is the prime offender -- entice corporate investment by offering a host of tax-relief packages. These create tax-free zones and limit property and estate taxes while they supply sustained incentives and services to growing businesses and those that move near research universities.

According to New Jersey’s business community, the state went a long way toward establishing parity with its neighbors by passing a set of tax-relief bills in 2011, then following them up with the Economic Opportunity Act of 2013 (''EO13"), which streamlines access to public incentive programs.

Yet despite the act being hailed as the most sweeping upgrade to the state’s business climate in history, informal advisors to the committee warn them not to become complacent about pushing further reforms. Taking a Beating


“We’re getting beaten up by the competition, especially New York, Pennsylvania, and Connecticut,” cautioned Suzanne Zammit, president of the New Jersey Business Incubation Network. The coalition of experts is tasked with nurturing the state’s more than two dozen business incubators and lobbying on their behalf.

Because New Jersey provides seed money and incubation programs to startups but few resources as they grow, Zammit says a large number take advantage of New Jersey’s public incentives geared toward fledgling enterprises then leave for states that offer continued support. But the state used to have such programs, and, say business boosters, should have them again. Before the Jon Corzine-era Edison Innovation Fund ran out of money, the NJ Economic Development Authority (EDA) used it to support “life sciences and technology companies throughout their discovery, development, and commercialization stages,” according to an EDA press release from 2008.

“It’s becoming very hard to attract the very best of the best. They’re going where the money is,” Zammit says, lamenting the state’s lagging position.

Incoming committee chair Gordon Johnson (D-Teaneck) says he hears the urgency in corporate boosters’ message. He expects his committee to spend the next two years taking up issues concerning infrastructure, incentives, education, and home rule laws that restrict Trenton’s zoning authority -- and maybe even tax reductions if the revenue can be recouped through greater employee spending.

Taxes and Incentives

Speaking at a hearing last week called to introduce committee members to the state’s major business-policy players and their agendas, David Brogan, first vice president of the New Jersey Business & Industry Association, cautioned members about New York’s robust programs that nurture incubators and offer prize money for winning entrepreneurs.

Speakers also noted that New York Gov. Andrew Cuomo is cutting corporate income taxes, setting up a 10-year tax abatement program in the western counties, and establishing tax-free zones near certain universities where, among other things, some employees who earn less than a $200,000 a year pay no income tax.

“We’re living in a very competitive world. States are trying to become more innovative . . . And in a high-tax state like New Jersey, there’s a greater need for incentives,” testified Brogan.

He also thanked lawmakers for reducing the S-Corp. filing fee by 25 percent and allowing small companies to factor in certain losses when calculating their gross tax burden, with some businesses receiving permission to carry losses forward for 20 years.

Brogan also appreciates that the Legislature moved from a three-factor formula that averages property, payroll, and sales when calculating business tax liability for companies that trade in New Jersey to one that’s based only on sales. Because this formula no longer penalizes companies that maintain property and employees in the state, Brogan considers it more equitable to companies with a large in-state presence.

But despite these favorable changes, Brogan said more needs to be done. He’d like the Legislature to revisit two failed budget proposals, one that would eliminate the sales tax on services associated with tax-free products (like software upgrades), and another that would raise the estate tax threshold from the current $675,000 to at least $1 million.

As it stands, Brogan argued, New Jersey’s estate tax, whose low threshold interferes with succession planning, is the country’s second-lowest after Pennsylvania, which has none. By contrast, he says, Delaware’s threshold sits at $5.25 million and New York and Maryland set theirs at $1 million. It matters because owners of family businesses are sometimes forced to sell off assets to pay the tax. With a higher threshold, fewer entrepreneurs would be liable.

“You don’t want to die in New Jersey,” he joked.

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