Growing up in Jersey gave you all the advantages of New York, but you were in its shadow. Anyone who’s come from here will tell you that same story. — Jon Bon Jovi
We received lots of kudos for last Thursday’s post about the end of New Jersey’s reciprocity with Pennsylvania. With so many of our readers calling the Garden State home, I figured I’d keep the focus on their issues this week.
New Jersey’s Tax Laws Are In The News Again
A few small Jersey businesses got together recently to decry the shenanigans of big business and the state government. Apparently big businesses are exploiting a tax loophole that allows them to avoid some or all of their New Jersey tax liability.
Under S982, interrelated companies are treated as a single company for tax purposes. So let’s pretend Acme Law Supplies is a business that operates in multiple states. The way an NJ.com article describes it, Acme Law Supplies can cleverly “create a subsidiary to own its stores and pay rent to a second tax-exempt real estate investment trust that pays dividends to a yet another subsidiary in a state with little or no corporate income taxes.”
So even though you’d pass Acme’s shops near every exit on I-95, as long as they planned well, they could avoid paying Jersey most state taxes while the little guy — that’s the small business owner — gets stuck with the bill.
On The Senate Floor
Hats off to those business owners who made their stand last week. It’s tough enough to be the little guy, but at least they had their moment in front of the state legislature.
S982 was brought to the state senate floor last week for an amendment to close this loophole, and all senators able to agree on was that insurance companies’ income is “excluded from all aspects of the corporation business tax combined return.”
If the tax code were to change and the hole was plugged, New Jersey would get its share of the income based on the New Jersey would gain an additional $110-290 million in taxes from corporate activity in the state.
Why does that higher number stand out so much in my memory?
That could cover the $250 million Governor Christie needs to cover from killing reciprocity with Pennsylvania.
But what do I know? I’m just a small business owner from Jersey.
Fact is, New Jersey is like the Rodney Dangerfield of the United States. As a resident of the fine state of New Jersey (once again, not only the Garden State, but America’s Medicine Chest) and a business owner in New York, I’ve got the unusual perspective that the former should rival the latter more than it does. It’s got the infrastructure in the form of the Port of Newark, the most excellent Newark Airport, and it has the businesses in the way of chemicals and pharmaceuticals.
Bad government has been ruining the state’s economy for years, which is why I’ve even advised some companies to avoid doing business in New Jersey just to avoid the lousy treatment.
Companies and individuals conduct business in New Jersey should contact Brinen & Associates.