NJ Business Matters: The Blog of the CIANJ

Happy New Year from CIANJ

New Jersey to America: A Warning

The Wall Street Journal's Main Street column uses New Jersey to send a message to President-elect Obama: Don't do it. Don't raise taxes during a recession and don't fall into the mental trap which dictates, "revenues are short, so we'll force more money out of the private sector."

After going over the poor job growth statistics that are all too familiar to our regular blog readers, William McGurn writes,

So how do we respond to these new hard times? Beginning New Year's Day, New Jersey workers will see even more money taken from their paychecks. The money will support a new mandate offering six weeks of paid family leave to almost all New Jersey employees -- right on down to those working in very small operations. In itself, the family-leave tax will not be the ruin of the state economy. But the imposition of yet another new tax at this moment bespeaks a lack of seriousness about what both New Jersey workers and businesses can afford.

For the moment, Mr. Corzine, like Mr. Obama, is putting his faith in public-works spending. Indeed, he has even called on the president-elect to expand his own plans for an infrastructure stimulus to $1 trillion. And it would be hard to deny that our tired infrastructure could use some attention.

But amid all the debate over jump-starting the economy through public works, we risk losing sight of a larger truth: What governors and citizens alike need most is a growing economy that is creating jobs for the people and sending revenue to the capital. Over the long run, the only way to have a healthy and growing economy is to do exactly what New Jersey has not: Trust the people with their own money, and create an environment where initiative and enterprise are rewarded rather than penalized.

Spending will necessarily fall next year because tax collections are so much lower than expected. However, without the other side of the equation - letting the state's residents keep more of what they earned - the state cannot climb back to its former economic status. The Corzine Administration has taken some steps in the right direction, but the journey is much, much longer than what was done in the last two months.

Choices, Choices

And we're back. After some time away from the keyboard for holiday shopping, Christmas ham and avoiding familial obligations, your friendly blogger has returned and will be posting with regularity.

We re-open with the re-opening of the state budget, which is in the worst shape in a generation or two, according to the Office of Legislative Services.

The first adjustments will be made on the fly. More than $1.2 billion in changes will be required for the current $32.9 billion state budget, now that tax collections are expected to be less than $31.5 billion this year. The state can drain its $600 million surplus for part of that, but it expects to make lots of smaller changes as well, nibbling away at spending in a way officials hope can get them through when combined with new federal aid.

The unemployment fund is nearly broke. The transportation fund lacks long-term funding, as does the open-space fund. New Jersey's income tax relies heavily on the year-end bonuses Wall Street has slashed. Car sales are down more than 40 percent, a direct hit on a big sales-tax driver. Businesses are losing money. New Jersey is down 34,400 jobs so far in 2008.

The hard choices to be made need to start by asking a basic question: is it the proper role of government to be doing "x" or interfering in the marketplace by subsidizing "y"? That is not to be confused with "is this spending item a good idea?" That question is best left to the private-sector.

Gov Tosses Throw-out Rule

Last Friday's snowstorm shut down posting here at NJ Business Matters. Sure, you can post from anywhere, but you cannot do that and shovel at the same time.

Lame excuses aside, CIANJ President John Galandak did brave the frozen tundra of the NJ Turnpike to witness Governor Corzine sign A-2722, which eliminates New Jersey's throw-out rule and regular place of business requirement.

The throw-out rule is a Constitutionally-questionable portion of New Jersey's corporate tax code, which applies NJ taxes to income earned in states that do not tax corporate income. The tax applies even if the sale has no connection to New Jersey (i.e. it shipped from Kentucky to Nevada). New Jersey and West Virginia are the only states with this provision, and the signing of A-2722 will save corporate taxpayers $149 million annually plus help make NJ's tax code more competitive.

As the boss told the Philadelphia Business Journal,

“Eliminating these onerous provisions of the tax code not only puts money back into the economy, but it makes New Jersey’s tax code more competitive in the modern economy. When the economy improves, mobile companies must decide where they will expand their operations, and changes such as the one made today make New Jersey an even more attractive option.”

We also applaud the Governor for signing three pro-business bills last week. When the recession ends, New Jersey needs to be in the strongest possible position, and moving our tax climate out of last place is a healthy start.

Bigger Government Is Not Stimulus...Video Edition

From the good people at the Center for Freedom and Prosperity.

NJ Unemployment Up to 6.1%

No way to sugar-coat the numbers coming out of Trenton this morning - the state lost 6,200 jobs in November, bringing the month's unemployment rate in New Jersey to 6.1%. That's better than the national average, but a 12-year high for the state.

From the Department of Labor,

Over-the-month losses were recorded in eight of eleven industry supersectors. The largest employment loss occurred in professional and business services which contracted by 1,900 jobs. All three industry components of the supersector registered job losses, led by professional, scientific and technical services (-1,200), followed by management of companies (-500) and administrative support/waste management/remediation services (-200). Also moving considerably lower was employment in manufacturing (-1,600) as both the durable (-900) and nondurable (-700) goods segments suffered job loss.

Next week, we will debut a video from Rutgers economist Dr. James Hughes offering his insights on how long the downturn will last in New Jersey.

Gov Signs UEZ Reform Bill

Yesterday in Trenton, Governor Corzine signed a piece of CIANJ-endorsed legislation to aid small businesses within Urban Enterprise Zones. UEZ businesses are exempt from the state sales tax for certain purchases. However, current law requires many companies to pay the sales tax, and then apply for a rebate. The bill signed yesterday allows companies with up to $10 million in gross receipts to receive the exemption at the point-of-sale.

These are cash strapped times, and waiting on Trenton to go through its machinations puts even more pressure on a small business owner. And, as CIANJ President John Galandak told the Press of Atlantic City,

"Unnecessary regulations take money out of the economy, and make the job of a small-business owner even more difficult during these times. The legislation signed today offers a common-sense step toward improving the state's business climate." 

We thank the legislature for its overwhelming support and the Governor for his speedy signature. Our press release is available here. In the picture that accompanies the release, the devastatingly-handsome gentleman to the far right of the Gov is the boss.

 

2nd and Short

The State Treasurer released some expectedly grim numbers from November's tax collections, showing the state took in $201 million less than expected for the first month of the second quarter. The only area of collections up this November versus last is the lottery. Here's the complete release and table made available yesterday, and the nugget below is from today's edition of The Record,  

Thanks to another bleak report on state revenues released Tuesday, Corzine said the budget deficit — and a series of new spending cuts — could total more than the $1.2 billion he predicted just last month.

"We need to find at least $1.2 billion and, as I have talked about, if we are in error, it will probably be larger numbers as we go forward if we sustain the kind of declines in revenue that we've been seeing the last two months," Corzine said Tuesday in Trenton.

The state's broke, and during the fall we were told that everything should be on the table, "including the gold on the [Statehouse] dome." If that's true, then it should include some third rails, such as project labor agreements, public pension costs and K-12 education funding. The value of gilded paint is down anyway.

Today in Trenton: Main Street Assistance, Corporate Tax Reform

This afternoon, the full Assembly and Senate will once again vote on legislation designed to improve the state’s tax climate. Among the legislation to be voted upon is:

 

A-2720 – Allows UEZ businesses with less than $10 million in gross receipts to receive their sales tax deduction through a point of sale exemption. Currently, companies with at least $1 million in receipts must pay the State the full sales tax, and then apply for a rebate.

 

A-2722 – Eliminates the “throw-out” rule and regular place of business requirement from New Jersey’s corporate tax code.

 

A-3377 – Establishes the “Main Street Assistance Program”, which would provide loans and guarantees to small and mid-sized businesses. $50 million would be appropriated under this legislation.  

 

Look for lots of applause coming from CIANJ later this afternoon.

21st Century Heckling

Russell Baker used to quip the job of a columnist is to walk onto the battlefield after the fighting is over, and shoot the wounded. You can add bloggers to that as well with this hysterical bit about a serious situation. The Illinois Policy Institute has put President-elect Obama's Senate seat on e-bay - tongue firmly in cheek, of course.

Click the image below for the full version.