These remarks, on S-982, were delivered to the Senate Budget Committee this afternoon.
Good afternoon, Mr. Chairman and Senators. Thank you for the opportunity to speak here today, and thank you, Mr. Chairman, for sponsoring this common-sense legislation to implement combined reporting in New Jersey.
This bill is a matter of tax fairness for New Jersey businesses that don’t have the bandwidth to hide income in out-of-state tax shelters. It is also a matter of collecting New Jersey’s fair share of corporate tax income – up to an additional $290 million, according to OLS – to help invest in the building blocks of a strong, healthy economy. Now is the time to update our corporate tax code and get in line with the 25 other “combined reporting” states, which include every single state in the Northeast.
When New Jersey’s legislature last addressed business tax reform in 2002, combined reporting was mostly left off the table. And an appointed commission assigned to review the new law essentially tabled the possibility of expanding combined reporting. At that time, only sixteen states had fully adopted combined reporting. Since then, nine states plus Washington D.C. have passed legislation to require this pragmatic corporate tax policy.
These states recognized that the failure to include combined reporting in their corporate income tax structures gives profitable multistate corporations free rein to artificially shift income out of the state and avoid paying taxes. Combined reporting uniformly stops these corporations from taking advantage of the tax loopholes that have remained in place, and new ones that corporate accountants may come up with in the future.
Claims that this tax policy is too burdensome for these corporations are unfounded. The continued willingness of these large corporations to maintain operations and even expand business in combined reporting states speaks volumes about the neutral impact this tax policy has on economic development. Ninety-four percent of New Jersey’s largest employers already maintain facilities in at least one combined reporting state. For these corporations, combined reporting is nothing out of the ordinary and is accepted as another cost of doing business.
Expanding combined reporting in New Jersey would level the playing field for all businesses in New Jersey while increasing the resources that states need to be able to invest in vital services like higher education, transportation infrastructure and public safety – services that all businesses rely upon and consider when making long-term plans.
New Jersey Policy Perspective fully supports this bill and we hope that it will soon get a vote from this committee and from the rest of the legislature. Thank you.