The one-year income tax increase that disproportionately affects employers who operate S corporations or limited liability companies whose business income is taxed as personal income expired on January 1. The income tax increase had raised the top personal income-tax rates to 8 percent on incomes over $400,000, 10.25 percent tax on incomes above $500,000, and10.75 percent on incomes above $1 million. Those rates have now been lowered to 6.37 percent on incomes between $75,000 and $500,000 and 8.97 percent on incomes over $500,000.

Tax increases on higher income brackets are often sold as a tax on wealthy individuals, but as NJBIA has repeatedly explained to lawmakers, the brunt of these tax increases actually falls on small businesses. Many small businesses file income taxes instead of corporate taxes, forcing them to pay the higher rates, even though the business owners’ take-home income was much more modest. NJBIA opposes any tax increase on small businesses, particularly in the middle of a severe recession. We are glad to see these tax increases die.

NJBIA is also working on the 4 percent corporate income tax surcharge to ensure that it expires as scheduled on July 1, reducing the corporate rate from 9.36 percent to 9 percent. This temporary tax was supposed to expire last year, but lawmakers and then-Governor Jon Corzine extended it for one year to balance the current budget. New Jersey already has one of the worst business-tax climates in the nation. Adding surcharges only makes it worse.

Governor Chris Christie has pledged not to raise taxes to balance the budget. Any re-imposition of these tax hikes by the Legislature would constitute a major tax increase on businesses during a terrible recession. For more information, contact Art Maurice.

2. State Budget Deficit Could Reach $2 Billion This Year

New Jersey faces a current budget shortfall of as much as $2 billion before the end of the fiscal year in June, according to David Rosen, the budget officer for the nonpartisan Office of Legislative Services. Testifying January 25 before the Assembly Budget Committee, Rosen said Governor Chris Christie’s projection of a $1.3 billion revenue shortfall between now and the end of the State’s fiscal year on July 1 was reasonable. The potential need for $668 million in new spending before the fiscal year ends could expand the deficit to $2 billion, Rosen said.

Legislators will have to close this year’s budget deficit before dealing with a budget deficit next year that could be as much as $10 billion, one third of the entire State budget. Christie has pledged not to raise taxes to balance the budget.

Rosen said the current budget deficit is based on projections which could change between now and the spring. April’s income tax collections will give policy makers a better idea of the budget picture, which could swing the results dramatically in either direction. For more information, contact Art Maurice.

3. Christie Nominates Cabinet Members

Governor Chris Christie has looked outside of Trenton and tapped the private sector to fill many of his cabinet positions. Several nominees have business backgrounds and others come from outside New Jersey. Christie has nominated:

- MetLife Vice President Thomas Considine as commissioner of Banking and Insurance;

- Essex County Prosecutor Paula T. Dow as attorney general;

- Attorney Lori Grifa as commissioner of Community Affairs;

- Former NY City Department of Corrections Deputy commissioner Gary Lanigan as commissioner of Corrections;

- Former Accenture executive Bob Martin as commissioner of Environmental Protection;

- Assistant US Attorney Charles McKenna as director of the Office of Homeland Security;

- Horizon Blue Cross Blue Shield Executive Director and Warren Township physician Dr. Poonam Alaigh as commissioner of Health and Senior Services;

- Former Executive Director for Prevent Child Abuse Janet Rosenzweig as commissioner of Children and Family Services;

- Education reformer and former Jersey City Mayor Bret Schundler as commissioner of Education;

- Former Commissioner of the New York State Department of Taxation and Finance Andrew P. Sidamon-Eristoff as treasurer;

- Engineering firm AECOM Vice President James Simpson as commissioner of Transportation;

- State Superior Court Judge Lee Solomon as president of the Board of Public Utilities; and

- Sussex County Freeholder Hal Wirths as commissioner of Labor.

Christie has chosen to keep three Corzine Administration officials: Douglas Fisher remains secretary of Agriculture; Glenn Reith remains adjutant general of Military and Veterans' Affairs; and Jennifer Velez remains commissioner of Human Services. Additionally, Lt. Governor Kim Guadagno will also serve as Secretary of State. Christie has also tapped Richard Bagger, a former Assemblyman and executive with Pfizer, to serve as his chief of staff.

4. Sweeney Pledges to Make Pension and Benefit Reform a Priority

NJBIA looks forward to working with Senate President Stephen Sweeney and a bipartisan group of legislators in reforming New Jersey’s pension system, which is one of the underlying causes of the State’s perpetual structural budget deficits and increasing debt. On January 25, Sweeney said he would make pension reform a top priority of the legislative session.

Sweeney said he would begin with a review of reforms proposed in 2006 by the bipartisan Joint Legislative Committee on Pension and Benefits Reform. It made 41 specific recommendations, but only 15 were enacted. The ideas include rolling back a 9 percent increase in pension benefits and changing the number of highest years of pay used to calculate pensions from three to five.

5. Meet the Decision Makers: NJ's Senate President and Assembly Speaker, Feb. 19

NJBIA has invited NJ's two most powerful legislative leaders, Senate President Stephen Sweeney and Assembly Speaker Sheila Oliver, to speak with NJBIA members at this special breakfast event, Friday, February 19 at the Forsgate Country Club in Monroe Township. Register online now.