New Jersey business owners are generally optimistic about the state’s economy heading into next year, but concerns about rising healthcare costs and taxes seem to be holding back growth.
Overall, members of the New Jersey Business & Industry Association responding to the group’s annual survey believe that the state’s business outlook is positive, according to results released yesterday by NJBIA. That marks the third year in a row that the organization found optimism among members in its annual business outlook survey.
This year’s results provide another sign of hope for a state that has been struggling to recover from the last recession. Other positive signs include increased hiring in recent months and tax collections that are up compared to this time last year.
But concerns raised by NJBIA’s members about the cost of doing business in New Jersey suggest that the economic situation here is prompting them to hold back on expansion and giving many business owners a reason to leave the state upon retirement, taking their wealth and charitable contributions to other places.
And that news comes just as lawmakers are preparing in the coming months for a broader debate about state tax policy and the best way to replenish the state’s Transportation Trust Fund as it heads toward bankruptcy by the middle of next year.
Lawmakers in recent weeks have talked about lowering or even eliminating New Jersey’s estate and inheritance taxes as they also consider hiking the gas tax to bring in more revenue for transportation projects. New Jersey is one of only two states in the country to levy both of the so-called “death taxes,” and nearly 70 percent of the business owners polled for the NJBIA survey said they consider the estate and inheritance tax burden when making business decisions.
Results seen as ‘caution flag’
“This is a caution flag for us,” said Michele Siekerka, NJBIA’s president and chief executive officer, during a news conference held in Trenton yesterday to discuss the survey results. “We have an opportunity to look at this data and do something about it.”
Overall, Siekerka said she was pleased with the results of this year’s poll, which included responses from more than 1,100 business owners. This is the 57th year in a row that NJBIA has surveyed its members.
“These survey results are a further indication that the New Jersey economy is heading in the right direction, on an upward trajectory, as our members continue to put the recession in their rearview mirror,” she said.
More than 60 percent of those surveyed said they increased wages for their employees this year and plan to do so again in 2016, with 25 percent expecting to provide raises of 3 to 5 percent. Another 50 percent said they expect sales to increase next year, and 45 percent said they are expecting to see higher profits in 2016.
Most firms plan to add workers
Twenty-five percent of the business owners surveyed said they plan to increase hiring in 2016, compared to 10 percent planning to cut back. That net positive of 15 percent marks the sixth year in a row that NJBIA has found more companies planning to add employees than those expecting to reduce their workforce.
Those positive results echo some other good economic news that has come out in recent weeks in New Jersey, including a slowly improving state unemployment picture. Federal labor figures released last month showed New Jersey added more than 16,000 jobs in October, pushing the state’s unemployment rate down to 5.4 percent, a full 1 percent lower than a year ago.
In addition, New Jersey tax collections were up nearly 5 percent after the first quarter of the fiscal year that began July 1, with revenues exceeding projections by $62.5 million, according to data provided to NJ Spotlight by the state Department of Treasury. Growth slowed in October but remained nearly 3 percent higher than it was over the same period during the last fiscal year, according to Treasury.
Siekerka said the real cause for caution among state business owners comes from what they see “the longer out they look.”
Worries about healthcare costs
Rising health-benefit costs ranked as the top concern by the business owners this year, with a full 80 percent saying they expect those costs to increase in 2016. And the overall cost of doing business – due to regulations and taxes – tied with property taxes as the second-leading concern.
Siekerka warned those concerns are leading NJBIA members to “express serious doubts about whether they will retire here and would expand their businesses here.” More than 60 percent said they if they do expand in 2016 it will be in another state, and 66 percent said they’re planning to live in another state when they retire.
Those results come just after New Jersey once again finished last in a ranking of states with tax policies best suited for business that was compiled by the conservative Tax Foundation.
“This is something that we need to pay attention to,” Siekerka said.