Top Legislative Successes in 2016
Many business-related laws enacted in 2016 were developed because of the strong efforts of our government affairs team, which works tirelessly as your advocate in Trenton to help businesses like yours meet New Jersey’s challenges. Just as importantly, NJBIA has also succeeded in convincing the Legislature not to enact certain proposals that would have made it more difficult for our member companies to do business in New Jersey. NJBIA counts the following as our top successes of 2016.
Estate Tax Repeal
Signed by the Governor Oct. 14, 2016 (P.L. 2016, c.57)
This law, NJBIA’s major 2016 achievement, increased the $675,000 NJ estate tax exclusion to $2 million effective Jan. 1, 2017 and completely abolishes the estate tax on Jan. 1, 2018. NJBIA has long advocated for the repeal of the estate tax because it impacts small business succession planning and causes the outmigration of New Jersey residents to tax-friendlier states. IRS tax data shows New Jersey has lost $20.7 billion in net adjusted gross income since 2005 and that has adversely affected state revenues, economic growth, and jobs. During the past 11 years, outmigration problem has caused $13.1 billion in lost economic output, nearly 87,000 jobs and $4.6 billion in total lost labor income. The elimination of the estate tax is a major NJBIA legislative success that will curb outmigration and boost economic activity in our state.
Pension Tax Changes
Signed by the Governor Oct. 14, 2016 (P.L. 2016, c. 57)
For years, accountants and financial planners had been telling their clients that New Jersey’s tax laws make this state too expensive for retirees to live in and this was due, in part, to New Jersey’s low threshold for taxing retirement income. The results of NJBIA’s annual Business Outlook Survey of our 20,000 member companies confirmed this belief, with more than two-thirds of respondents saying they would not make New Jersey their home after retiring. NJBIA worked to change the law to gradually raise the retirement income exclusion for seniors to a maximum $100,000 for married couples by the 2020 tax year, making it more affordable for New Jersey seniors to stay here. By comparison, the 2016 tax year threshold on retirement was a low $10,000 for individuals and $20,000 for married couples.
Signed by the Governor October 14, 2016 (P.L.2016, c.56)
This law revised the “New Jersey Transportation Trust Fund Authority Act of 1984” to pay for the state’s capital transportation program for fiscal years 2017 through 2024 by authorizing up to $12 billion in borrowing and $16 billion in direct appropriations from the authority’s revenues. This sustained investment of $2 billion annually, which is supported by an increase in the gas tax, will fix the roads and bridges that are so crucial to New Jersey’s continued economic growth, particularly for our transportation and logistics industry, and it will also produce an estimated $4.7 billion a year in economic activity while creating 34,000 jobs directly and indirectly with annual payrolls of $1.4 billion.
Gas Tax Revenue Dedication
Approved by Voters November 8, 2016
This constitutional amendment, strongly supported by NJBIA, ensures all revenues raised by the gas tax are kept in a metaphorical “lock box” and only spent on transportation projects. Without this constitutional amendment, gas tax revenues could be siphoned off by a Governor or Legislature during the annual state budget process and spent on other state programs. NJBIA actively supported this constitutional amendment, which ensures gas tax revenues are spent on the transportation projects for which they were intended.
NJ-PA Income Tax Reciprocity Pact
Announced by the Governor on Nov. 22, 2016
Residents of New Jersey and Pennsylvania will continue to pay income taxes where they live, instead of where they work, now that a bi-state tax reciprocity agreement scheduled to be abolished in 2017 has been re-instated. Due to a projected budget shortfall, New Jersey initially had notified Pennsylvania it would be pulling out of the agreement in a move that could have affected 250,000 commuters and many NJ businesses employing PA workers. Since New Jersey’s top graduated income tax rate of 8.97 percent is significantly higher than Pennsylvania’s flat 3.07 percent rate, NJ businesses feared they’d lose valuable employees or be forced to raise wages to compensate for the tax change. NJBIA lobbied on our members’ behalf and welcomed the news from the Governor on Nov. 22 that the tax reciprocity pact would remain in effect because $200 million in savings in the state budget had been realized through healthcare reforms.
Minimum Wage Hike
A-15 Vetoed by the Governor on Aug. 30, 2016
Legislation to increase New Jersey’s minimum wage to $15 an hour over four years was vetoed by the Governor. NJBIA lobbied against the $15 minimum wage because it went too far too fast and would have had a devastating impact on our state’s economic recovery and our small businesses, which would have had to cut employees or raise prices in order to deal with higher payroll costs. NJBIA recognizes the state’s minimum wage has not kept up with inflation and should be increased responsibly. The state, however, must also address the root causes that make it so unaffordable for minimum wage workers to live here, such as New Jersey’s high housing and healthcare costs and exorbitant property taxes.
Paid Sick Leave
The original Senate proposal would have required all employers to provide workers with either 5 or 9 days of paid time off, depending on the company’s size. NJBIA strongly opposed this legislation because it would impose additional record-keeping requirements and regulations on business – most of whom already have paid time off policies. NJBIA was successful in securing several amendments to the Senate bill including amendments adopted on June 23, 2016 that would exempt businesses with fewer than 10 employees. The Assembly has taken no action on this legislation, which requires approval from both houses of the Legislature and the Governor’s signature before it can become law.
Anti-inversion legislation would withhold state contracts or economic development grants from companies that utilize corporate inversions. A corporate inversion occurs when a U.S.-based multinational corporation restructures so that the U.S. parent is replaced by a foreign parent. Additionally, corporate inversions take place because of the anti-competitive nature of federal tax code and have little to no impact on the collection of the state Corporate Business Tax. NJBIA opposed the bill and testified against it in September because withholding grants and contracts would likely cost New Jersey jobs and damage the state’s economy. The full Senate has not taken action on this bill.
NJBIA has strongly opposed this legislation, which would require members of unitary business groups, or a group of affiliated companies, to file combined reports of Corporate Business Tax (CBT). Combined reporting would create uncertainty and generate costly and time-consuming litigation between companies and state auditors over what constitutes a unitary group of businesses, without necessarily providing any more CBT tax revenue. In its lobbying efforts against this legislation, NJBIA noted New Jersey already has numerous safeguards in place to ensure companies pay an accurate amount of CBT on their New Jersey taxable income. This legislation, which was recently amended to exclude insurance company income, has not been voted on by the full Senate.
Constitutional Amendment on Public Employee Pension Payments
A proposed constitutional amendment to require New Jersey to make quarterly pension payments for state-administered retirement systems did not appear on the ballot in 2017, thanks in part to NJBIA’s efforts to persuade legislators that this change would have created an annual budget crisis and led to significant tax increases. Using the state constitution to make public worker pensions a super priority that is constitutionally required before any other state spending would have caused an estimated annual budget deficit of $3 billion to $5 billion. Appropriations for pensions should remain part of the annual budget process so that this spending can be weighed against all other state needs, including education, healthcare and public safety.