Income Tax Cut Is Good For Business
By Senator Tom Kean, Jr
To hear the Governor’s critics tell it, New Jersey’s high income tax rates have no effect on our economic health. To them, the income tax can be raised without consequence to our economy, while reducing rates yields little or no benefit.
New Jersey’s business leaders- the entities responsible for employing the vast majority of the state’s workforce- disagree, however.
The New Jersey Business and Industry Association, representing 21, 500 businesses of all types in the Garden State, lauds the Governor’s proposed 10% reduction in the income tax as “the best thing you can do for taxes”. Noting that the majority of businesses file under the personal income tax rather than the corporate income tax, NJBIA says the proposal will give savings to “80% of the business community”.
More telling, however, is what individual small business owners and operators are saying upon learning of the Governor’s proposal.
“It signals your government is working with you, and that you’ve got government at your side at a tough time,” says a proprietor of a Hoboken print shop.
“I believe it to be a proposal that, in fact, could significantly alter New Jersey’s favorability rating, in terms of being a destination of choice,” said the president of a Linden-based manufacturing outfit.
Republican legislators join the Governor’s call for an income tax reduction because we trust the real world experience of job creators. Who better to help guide New Jersey on a path toward sustainable, good paying jobs than the people who do the hiring?
Democratic critics are putting their faith in higher taxes, more spending and bigger government as the solution to the problem. If history is any indication their trust is misplaced, given that the exponential increase in state spending, taxes, and debt we saw from 2002 through 2009 coincided with the loss of 150, 000 jobs.
Coincidentally, these are the same Democrats who raised taxes on middle class families repeatedly during those years, taxing everything from utility bills and car tires to gym memberships and home ownership. Their credibility on helping the middle class is suspect at best.
Smart income tax policy is good jobs policy, and New Jersey is currently at a severe disadvantage in a competition for jobs with neighboring states.
Pennsylvania’s 3.07% income tax rate is far more attractive than the 6.37% rate many middle income families and small business owners pay in New Jersey, and certainly preferable for businesses that file at the state’s 8.97% top rate.
New Jersey lost more residents to Pennsylvania- over 20, 000- than any other state in 2010. That figure is roughly one-third of the total population loss New Jersey experienced that year. The economic and cultural impacts of these moves are real.
The engines of job creation and population growth in America, states like Texas, Florida, and the Carolinas, have tax rates that either are far lower than New Jersey’s or no income tax altogether.
It cannot be sheer coincidence that the states experiencing economic success are ones that have favorable tax climates as compared with the rest of the nation. Income tax levies are a substantial factor in a state’s overall business climate and economic growth.
Opponents of the Governor’s tax cut plan in the Legislature are trying to confuse the issue by changing the subject to property taxes. I agree that New Jersey’s highest in the nation property taxes are the shame of our state and must not only be contained, but lowered. Unfortunately, the Democrats’ plan to use state tax revenues to offset local levies is unlikely to reduce a single county, municipal, or school tax rate.
Their plan is a state incentive for property tax increases, not a solution for reducing them. Permanently lowering property taxes requires us to help local governments control labor costs, share services, and live within their means so that fewer tax dollars are needed to operate.
The effort to reduce property tax bills need not, and should not, come at the expense of job creation and economic growth in New Jersey.
Income taxes do matter to our economic health and jobs climate. Businesses, and the experiences of states that have successfully attracted job growth, show this to be the case. It is time that New Jersey start listening to them in order to strengthen our economic future.
State Sen. Tom Kean, Jr., R- Union, serves as the Senate’s Republican leader.