CCSNJ Final FY2010 State Budget Testimony
Monday, June 15, 2009

MEMORANDUM

TO: Members of the Assembly Budget Committee

FROM: Christina M. Genovese, Manager, Government Relations

RE: FY2010 State Budget

DATE: June 15, 2009

The Chamber of Commerce Southern New Jersey would like to respectfully offer its comments on the FY2010 State Budget. As stated in our previous budget testimony, this is a most challenging and sobering year for us in the business community. We are all feeling the effects of the recession. The Chamber understands this fiscal crisis is also affecting the State. Budget deliberations have become challenging as revenue collections continue to decline, reflective of the economic climate.

To that end, the Chamber believes that the absolute worst “solution” is to raise taxes on the business community as a way to generate revenue in FY2010. The recession is touching every one of our member companies who are forced to make tough decisions. Zero salary increases, salary decreases, furloughs of days, weeks and even months, four day work weeks, and – a last resort – layoffs, are just some of the survival tactics in the private sector. We hear stories every day from our member companies – many of whom are small businesses – of their struggles to survive. Higher taxes will simply make this situation worse. Revenue that could be used to create jobs, shorten furloughs, or increase salaries for employees will instead be needed to pay higher taxes.

FY2010 calls for several tax increases that will directly impact the business community. The first is the expected increase needed to replenish the Unemployment Insurance Trust Fund – upwards of $100.00 per employee. While an additional $100 per employee may not sound significant, to an employer with 2,000 employees, it amounts to an additional $180,000. Again, this money will now be used to pay taxes, rather than salaries or other investments in a business. We do want to note that we are appreciative of Governor’s Corzine’s commitment to keeping the dedicated $120 million infusion in the UI Fund, which will stave off an even higher tax increase than what we are destined to experience starting July 1.

Another tax we oppose would increase the insurance premium group health tax as outlined in A-4108 (Cryan), which will more than double this tax -- from the current 1.05 percent to 2.30 percent and increase the tax rate on risk retention groups and dental service corporations. Although the Chamber is pleased the original tax increases proposed by the Administration, which included an increase in the insurance premium tax on all lines of insurance and a proposal to increase the HMO assessment from 2 percent to 3 percent, have been removed from consideration, the Chamber believes these new increases will fall squarely on the shoulders of New Jersey employers as insurers will be forced to raise their premium rates to recoup costs.

Additionally, the income tax increases outlined in A-4102 (Watson Coleman) are taxes that may not sound like a business tax increase, but indeed will certainly impact small businesses. Up to 90 percent of businesses file taxes as individuals and therefore pay personal income taxes rather than corporate income taxes. Many of these taxpayers are small businesses – those incorporated as Limited Liability Companies, General Partnerships, Limited Liability Partnerships, and S Corporations – who are hardest hit by the effects of the recession.

Lastly, there is the extension of the 4 percent surcharge on the Corporation Business Tax, A-4105 (Pou), which was due to expire this year, amounting to an additional $80 million bill to businesses.

While Governor Corzine and the Legislature have enacted some meaningful changes to State tax policies, we still struggle with the impacts of current policies. New Jersey’s tax policies have placed us at the bottom of the Tax Foundation’s 2009 State Business Tax Climate Index based upon the State’s third worst individual income tax, the tenth worst sales tax, eleventh worst corporate tax rate, and worst property tax. And, New Jersey also ranked last in the Small Business & Entrepreneurship Council’s Business Tax Index 2008.

The Chamber believes that the need to increase income taxes, the insurance premium group health tax, UI tax, or extend the Corporation Business Tax can be at least partially offset by seeking additional cuts to state spending. We are now at a crisis point where the excesses of the past are bearing down and demanding solutions and actions. The growth in the size of the state government workforce and the benefits afforded public employees at all levels of government has become seriously unsustainable. Our organization has sounded the alarm about the high cost of these benefits for many years and in the past five years we have issued nearly two dozen recommendations to reduce employee related expenses.

The Chamber urges you to reject theses tax increases and instead seek additional cuts to state spending. Thank you for the opportunity to weigh in on the FY2010 State Budget.