News Release: June 20, 2002For small and medium-sized businesses that do not have out-of-state subsidiaries or use tax loopholes, proposed Democratic amendments to the Corporation Business Tax increase will offer little relief, Philip Kirschner, executive vice president of the New Jersey Business & Industry Association, said today.
"These amendments do not fix the fundamental flaw in the bill-taxing gross receipts and gross profits. Small and medium-sized businesses that do not use loopholes will get hit with huge tax increases that neither they nor the state can afford," Kirschner said.
"This a tax on salaries, on employee health benefits, on new business equipment, on utility bills, on rent, and on the billions of dollars New Jersey employers spend every year just to operate their business," Kirschner said.
The bill, S-1556 (Kenny)/A-2501 (Sires, Roberts), would impose a new Alternative Minimum Tax (AMT) on C corporations. The AMT would consist of a 0.3 percent tax on gross receipts or 0.6 percent tax on gross profits (gross receipts minus the cost of goods). Employers would be required to pay the new gross receipts/gross profits tax or the existing Corporation Business Tax on net profits, whichever is greater.
The proposed amendments would exempt the first $2 million of a company's gross receipts or the first $1 million in gross profits. (The original bill would have excluded the first $1 million and $500,000, respectively.) However, the exemptions would not apply to businesses with more than $4 million in gross receipts or $2 million in gross profits. Such an amendment would actually make taxes even higher for tens of thousands of small and medium-sized businesses.
Furthermore, increasing the thresholds still does not allow employers to deduct legitimate business expenses like salaries, health insurance, retirement benefits, utility costs, local taxes, and rent, Kirschner said. Many NJBIA members have said their companies would get hit with an average tax increase of $50,000.
"These are businesses that do not use loopholes, who play by the rules and who have been paying their fair share of taxes for years," Kirschner said. "This is bad policy that will cost people their jobs and hurt our economy. Legislators should reject the idea of taxing gross receipts and gross profits as a regressive, unfair means of raising new revenue."
NJBIA represents more than 18,000 member companies, 90 percent of which are small businesses with between one and 49 employees.
For more information, contact Chris Biddle at 609-393-7707, ext. 227, or Steve Wilson at ext. 245.
