To address the weakness in New Jersey’s economy, legislators should take immediate action now to stop the State’s job losses and position our economy for strong job creation  in a future economic recovery, NJBIA said in remarks prepared for delivery September 22 to the Assembly Labor Committee.

NJBIA Vice President John Rogers pointed out that New Jersey has lagged behind the nation in the rate of job growth for several years, indicating that the State’s economic problems go much deeper than a national recession or a crisis in the financial markets.  He offered several proposals on tax reform, regulatory streamlining and job training that he said would position New Jersey to weather the storm.

"The economic problems facing our State did not manifest themselves over the past two weeks; nor can they be simply written off as the effects of a weak national economy," Rogers said.  "New Jersey’s economic climate, while shaken due to the recent events on Wall Street, has been suffering for several years.  What remains to be seen is how this latest crisis will further drive down New Jersey’s lagging economy."

"What New Jersey needs now is for our State leaders to act swiftly and decisively to stop the job losses we're facing, and position New Jersey for stronger economic recovery in the future," Rogers said.

While many policy makers have focused on the 14,600 jobs New Jersey has lost in 2008, Rogers pointed out that New Jersey’s private-sector job growth has been dismal since as far back 2002.  As the nation created jobs at a rate of nearly 6.5 percent between 2003 and 2007, New Jersey job growth was a paltry 2.2 percent. 

"The crisis in the State’s economy is not a tidal wave from last week, but a steady rising of the flood waters," Rogers said.

To get back on track, Rogers urged legislators to reform New Jersey’s tax structure so that it did not penalize companies that create jobs.  Specifically, he said legislators should eliminate the tax penalty for basing operations in New Jersey.  Under the Corporation Business Tax, a company’s New Jersey tax is based on three factors: New Jersey sales, New Jersey property and New Jersey payroll. The more New Jersey presence a company has, measured by New Jersey employment, offices and plants, the higher the New Jersey tax.

For out-of-state companies that simply sell their goods and services in New Jersey but have few, if any, jobs or properties here, these factors go untaxed.  So a company could lower its New Jersey CBT by moving its operations and jobs out of State and simply selling its goods here.

"This is backwards," Rogers said. "At a time when we want to attract and retain jobs, our corporate tax structure is working against us."

Seventeen states, including New York, Pennsylvania, Maryland and Massachusetts, have adopted some form of single-sales-factor tax reform so that companies are taxed only on their in-state sales.

In addition to a high tax burden, businesses must also face high costs of complying with regulations.  In 2006 and 2007, the New Jersey Department of Environmental Protection (DEP) proposed (and subsequently adopted) over 2,000 pages of land use regulations, almost all of which have a negative impact on economic growth in the State of New Jersey.   Rogers urged legislators to exercise more oversight on government bureaucracies and "step in when necessary."

Finally, he urged the committee to review its job training programs with an eye to streamlining requirements so that employees at more small businesses can utilize them.