May 2, 2003
Study confirms that 'New Jersey Plan' of tax hikes hurt New Jersey
New Jersey's huge corporate tax increases in 2002 did significant economic damage to the Garden State, a new study shows.
The report validates concerns The Business Council has voiced since unions and other pressure groups began pushing the same tax increases in New York. The Council has dubbed that proposal "the New Jersey Plan."
By raising corporate taxes, New Jersey has stunted job growth, personal income, and growth in the gross state product, the study shows. The study was sponsored by the Center for Policy Research of New Jersey (CPR) and conducted by Nancy Mantell, head of Rutgers Economic Advisory Service.
"The state's economy will pay a price for the [corporate business tax] increase. The goal of fiscal stability has not been realized. Moreover, as a direct result of the CBT increase, New Jersey will see fewer new jobs, higher unemployment and a less productive economy," said Gregg M. Edwards, president of CPR.
The Business Tax Reform Act, adopted by New Jersey last July, nearly doubled the corporate business tax.
The study projected that New Jersey will lose about 13,500 jobs due to the increase, and it said that businesses have already left the state or folded as a result of the tax increase.
The negative effect on businesses was predicted last year by New Jersey businesses, The Business Council, and other experts.
In September, Glenn Newman, a state and local tax practitioner, argued that New Jersey's tax increases on businesses "drastically alter New Jersey's corporate tax landscape, making it inhospitable to large corporations."
His article, "Did New Jersey Turn New York Into a Tax Haven?", argued that the tax increases in New Jersey made New York state look like a "tax haven" in comparison. (A Business Council summary of Newman's article is at www.bcnys.org/whatsnew/2002/0926njtx.htm.)
In a March 31st letter to lawmakers, Business Council President Dan Walsh used New Jersey of an example of what not to do to business.
"The damage to New Jersey's business climate was immediate, and we New Yorkers leapt to take advantage of it," Walsh wrote. "Economic developers across New York (and elsewhere) are still using this misstep as they seek to lure businesses out of New Jersey."
What's more, the tax increase didn't help, and it may have hurt, he added. The state faces a $1.3 billion deficit this year, another $5 billion deficit next yeareven though it has already securitized its tobacco settlement monies. For details on Walsh's letter,visit www.bcnys.org/whatsnew/2003/0331njp.htm.