Category: Press Release

Closing Corporate Loopholes: A Win-Win

Posted on by Jon Whiten

TRENTON, NJ: At a State House press conference today, legislators, policy experts, small business owners and tax fairness advocates unveiled reworked legislation to close corporate tax loopholes in New Jersey by requiring “combined reporting.” Senators Lesniak, Sarlo and Greenstein were joined by Assemblyman Holley, policy experts, small business owners and advocates in kicking off a renewed push to join the 25 states plus the District of Columbia that require this common-sense accounting method that prevents corporations from artificially shifting income, thereby avoiding state taxes.

“Some highly-profitable companies exploit tax laws like a corporate shell game to avoid paying their fair share,” said Sen. Raymond Lesniak, prime sponsor of the legislation. “They create phantom subsidiaries to ‘shift profits’ away from New Jersey. By closing this loophole the state could generate as much as $200 million a year. This will help address the fiscal needs of the state.”

“Every year when we sit down and work out New Jersey’s budget, we have to make hard spending decisions based on available revenues,” added Senate Budget Chairman Paul Sarlo, a co-sponsor of the bill. “Closing tax loopholes would ensure that multistate and multinational corporations doing business in New Jersey are paying their full tax bill, resulting in a modest boost to the budget and a big help to small businesses throughout the state.”

How does combined reporting work? Here’s the quick explanation: It treats the parent company and subsidiaries of multistate corporations as one entity for state corporate income tax purposes. Their nationwide profits are added together and the state then taxes the share of the combined income generated in the state. While this doesn’t prevent profitable corporations from shifting profits to dummy corporations in Delaware and other states, it does eliminate the New Jersey tax break they currently get if they do so.

“We need to close these loopholes, capture this revenue, and hold multistate companies to the same level of accountability as the rest of New Jersey,” said Sen. Linda Greenstein, a co-sponsor of legislation. “This is an issue of fairness and shared responsibility.”

The majority of states that tax corporate income – 25 of 45 – currently mandate combined reporting, as does the District of Columbia. Many of these states have had this policy on the books for decades, but a growing number of states – most recently Connecticut – have joined them in recent years.

“Combined reporting, quite simply, is a policy that works,” said Assemblyman Jamel Holley, who has sponsored the Assembly version of the legislation. “I hope that more of my colleagues in the Assembly will soon join me and Assemblyman Dancer in advocating for this essential step to level the playing field for small businesses and better invest in the assets that are proven to grow the economy.”

The press conference coincided with the release of a new report from New Jersey Policy Perspective (NJPP), which shows that nearly all of New Jersey’s largest employers are already subject to combined reporting in other states.

“Most of New Jersey’s largest employers already operate in combined reporting states and, in some cases, have been doing so for decades. For them, combined reporting is nothing out of the ordinary and is accepted as another cost of doing business,” said Sheila Reynertson, Senior Policy Analyst at NJPP and author of the report. “This is the clearest evidence yet that adopting combined reporting would not harm New Jersey’s business climate. In fact, it would greatly improve the business climate by allowing small and locally owned businesses to better compete with their multistate and multinational counterparts.”

“The money I earn goes back into my community and so do the taxes I pay,” said Erick Cedano, the owner of Graphic Core LLC and Fast Photo Plus in Elizabeth. “Unlike multistate corporations, I don’t hide my earnings in other states. A combined reporting bill would ensure a level playing field for everyone and ensure that communities across the state served by small businesses have the funding they need to prosper, and that we can meet the challenges facing us with success.”

Cedano is a member of the New Jersey Main Street Alliance, a statewide organization representing more than 1,500 independently owned businesses. Closing corporate loopholes is a top priority of the small business community across New Jersey.

“In this day and age small business owners have to work harder than ever to be successful. This is especially true in a time when multistate and multinational corporations have massive advantages, including tax breaks that will never apply to a pizzeria in Newark, a photographer in Elizabeth, or a toy shop in Princeton,” said Main Street Alliance Business Representative Jerome Montes. “Our main streets can’t prosper without healthy small businesses, and our small businesses can’t prosper without a healthy main street. Enacting combined reporting bill would go a long way to ensuring everyone community in New Jersey wins.”

Fourteen years ago, New Jersey took some initial steps towards closing corporate loopholes with the New Jersey Business Tax Reform Act, which banned deductions for royalties paid to related out-of-state companies and required combined reporting by all casinos and any corporation suspected of abuse by the Division of Taxation. Yet lawmakers did not opt to mandate combined reporting for all corporations. As a result, New Jersey has lost out on more than $2 billion in revenue since. It’s beyond time for the state to level the business playing field even more and create an even firmer foundation for the future by closing more corporate loopholes.

“It’s time to close corporate loopholes and ensure our state tax policies raise up families and communities, not the profit margins of big business,” said Analilia Mejia, Executive Director of New Jersey Working Families. “For policymakers to not use combined reporting to collect up to $200 million a year in taxes that large corporations owe, particularly at a time when working folks around the state have grappled with devastating budget cuts, is not only bad policy – it’s immoral.”

“These kinds of corporate loopholes that allow giant corporations to shirk their responsibilities not only put small businesses at a competitive disadvantage, but threaten the very public investments – like public education and reliable infrastructure – that corporations rely on,” added Ann Vardeman, Program Director at New Jersey Citizen Action. “Enacting combined reporting would help level the playing field and ensure continued investments in what makes New Jersey a great place to live and do business.”

Eliminating the Estate Tax: Bad for the Middle Class, Bad for Small Business, Bad for New Jersey

Posted on by Jon Whiten

FOR IMMEDIATE RELEASE: JANUARY 19, 2016
Contact: Jon Whiten, NJPP: whiten@njpp.org | 609-393-1145 ext. 15

Cutting this tax on inherited wealth would benefit the wealthiest while taking $300 million a year away crucial services

Eliminating New Jersey’s estate tax, as Gov. Christie proposed in his State of the State address last week, would deprive the state of resources needed to promote widespread prosperity while benefiting the state’s highest net-worth households the most, advocates, policy experts and small business owners said Tuesday.

The governor pitched his call to kill this tax on inherited wealth as something that would boost New Jersey’s shrinking middle class. But that claim isn’t borne out by the facts, according to a new report released today by New Jersey Policy Perspective (NJPP).

In fact, the estate tax only affects the wealthiest 4 percent of New Jersey households, with fewer than 3,000 families a year owing this tax. And since the tax is highly progressive, taking 41 percent of its collections from the 94 estates that each have taxable assets of more than $5.34 million, eliminating it would deliver an enormous tax cut to the New Jersey families that need it least. These 94 estates would get an average tax break of $1.3 million – a reduction 58 times larger than the break for the families with taxable assets between $675,000 and $1 million.

“This is the worst time for the governor’s proposal,” said Gordon MacInnes, President of NJPP. “The state is effectively broke and he proposes that the very wealthiest families be handed a huge tax break, while the 99 percent of the rest of us try to get along in high-cost New Jersey.”

“Six years of tax breaks for the wealthy and corporations have already thrown our economy out of whack and left the state unable to meet our responsibilities or basic needs,” added Rob Duffey, Policy and Communications Director of New Jersey Working Families. “New Jersey’s wealthy don’t need another tax cut, and New Jersey’s working families certainly can’t afford to once again pick up the tab through even higher property taxes, transit fares and tuition.”

Eliminating the estate tax, and the $300 million in tax revenue it collects, would also hamper the state’s ability to invest in the assets that make New Jersey a great place to do business, small business owners said.

“I choose to work and live in New Jersey because of the good access to services, an educated workforce and thriving communities – all things that the estate tax helps pay for,” said Kelly Conklin, owner of Foley Waite Associates in Kenilworth and a Steering Committee Member of the New Jersey Main Street Alliance. “And we shouldn’t kid ourselves that it’s a tax on small business. My woodworking company has enjoyed a lot of success over the years selling high-end products to customers throughout the region. But the estate tax won’t affect me. Neither will it affect your dry cleaner, barber, child care provider, mechanic, nor the carpenter who built your new kitchen – none of these small business owners are likely pay a dime in estate taxes.”

“What our members need are more customers with more money in their pockets,” added Jerome Montes, business representative of the New Jersey Main Street Alliance, a network of 1,400 independent businesses across the state. “Repealing the estate tax won’t help with that, as it benefits only the very wealthiest of New Jerseyans. Giving them a tax break isn’t going to make them buy more pizzas or chairs or sign their children up for more soccer lessons. And it takes money away from the communities that our small business owners depend on.”

And at a time when more and more New Jersey families are living in poverty – a measure that’s seen an 18 percent increase in the past five years – eliminating the estate tax would also have disastrous ripple effects that would devastate low- and moderate-income people that rely on the state for vital services.

“This benefit for the few has to be seen in the context of what it will cost the rest of us,” said Serena Rice, Executive Director of the Anti-Poverty Network of New Jersey. “In a significant way it will cost us our ability to respond to the very real and pressing needs of our neighbors, and it will cost us our ability to say that we really care.”

“Any assertion that eliminating this tax on inherited wealth will primarily benefit middle class families is dishonest at best. Instead, it should be seen for what it is: another giveaway to the super rich,” added Ann Vardeman, Program Director at New Jersey Citizen Action. “New Jersey families need investments in our roads, schools and safety net programs in order to build a strong economy. Giving away $300 million every year to the inheritors of the 3,000 wealthiest estates in New Jersey will make it nearly impossible for future legislatures to meet our fiscal obligations without more devastating cuts to our schools, health care and safety net programs upon which working families rely.”

Business lobbyists and proponents of eliminating this tax have been pounding the drum about the estate tax supposedly leading to a mass “exodus” of wealth and income from New Jersey, there’s not a single shred of credible evidence to support these contentions.

These folks throw around numbers like $12 billion in net income lost over a decade, which sure sounds like a lot of money but is in fact only about half of 1 percent of the total amount of income generated and earned in New Jersey. For example, from 2012 to 2013, New Jersey posted a net loss of $1.7 billion in income that “migrated,” but the total amount of income in the state that year was $319 billion.

And what’s more, about 3 in 4 tax filers whose “migrate” out of New Jersey in a year have household incomes of less than $75,000, and just 6 percent had incomes over $200,000 – a pattern that holds relatively steady across all age groups, even older folks and retirees.

“The bottom line is that the overwhelming majority of the people taking their income out of New Jersey are not subject to the estate tax,” said Jon Whiten, Deputy Director at NJPP and author of the report. “Folks who say they’re concerned about New Jersey’s economy, but focus their attention on a tiny sliver of income leaving the state, rather than how to maintain and grow the economic activity that’s already here, are missing the forest for the trees.”

It’s Time to Slow Down Misguided Push for North Jersey Casinos

Posted on by Jon Whiten

It’s Time to Slow Down Misguided Push for North Jersey Casinos
Mad dash to put this on the 2016 ballot has shoved aside critical questions that must be answered

Today New Jersey legislators will revive their efforts to expand casino gambling to North Jersey. To date, much of the Trenton discussion on this issue has been bogged down in regional turf wars over minor (though not unimportant) details. Yet this narrow focus misses the forest for the trees by assuming that North Jersey casinos are a foregone conclusion and, more importantly, assuming that expanding casino gambling is in New Jersey’s best interest.

Throughout the Garden State’s history, gambling’s economic benefits have proven to be exaggerated: internet gambling, Sunday horse-racing, outsourcing the state lottery to a private vendor – all were sold on a promise of higher revenue for the state. Over the long run, all have failed to deliver. This casino expansion is no different.

“The casino expansion push is based on several assumptions: that opening two new casinos in the state will intercept revenue that is now being lost to neighboring states, that a percentage of the casino revenue would help to revive Atlantic City and that casinos will bring hundreds of millions of pain-free revenues to a state sorely in need of money to pay for critical services,” says Sheila Reynertson, senior policy analyst at New Jersey Policy Perspective (NJPP). “All of these assumptions are highly questionable.”

And the timing couldn’t be worse. Whether or not gambling expands outside of Atlantic City, the fate of gambling in New Jersey has in many ways already been decided. The industry as a whole is on its way out. Casinos are no longer the draw they once were in a market that has already reached its saturation point. Even industry experts agree that building more casinos is not a sustainable answer to the state’s economic problems, let alone a salve for Atlantic City’s woes. This is a fact that is being roundly ignored by a legislature seemingly hell-bent set on expanding casino gambling.

In legislative leaders’ rush to get this on the 2016 ballot, they are showing once again their preference for politically painless short-term “fixes” for New Jersey’s economy. In doing so, they have shoved aside obvious, common-sense questions that deserve answers before this moves any further.

* Would North Jersey’s two proposed casinos do much more than cannibalize Atlantic City’s declining customer base?

* What tax rate will these new casinos pay, and where will that money go?

* Speaking of, how does funneling a share of tax revenue to Atlantic City – revenue that won’t likely be realized until the end of this decade – forestall the city’s economic decline?

* How will New Jersey and local communities pay for the infrastructure upgrades and increased public services these new casinos will require?

“I have three simple words for the legislature and other casino expansion proponents today: ‘slow down, please,’” says NJPP president Gordon MacInnes. “Given New Jersey’s dicey history with legalized gambling, the enormous changes in the gaming marketplace and a list of obvious, unaddressed questions, please stop the mad dash to put this on November’s ballot. To do otherwise would be imprudent, unwise and reckless.”

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