NJ 3rd worst in US for corporate taxes, policy researchers say

Only two states have a worse business tax climate than New Jersey, and the Garden State continues to rank last in a series of metrics measured by the Washington, DC-based nonprofit Tax Foundation.

Neither the company ratings nor the overall ratings were able to top other states in the 2022 report of the Tax Foundation, according to political analyst Janelle Cammenga. The 50th overall ranking dates back to at least 2016, if not earlier.

Cammenga said seeing New Jersey consistently bottom is frustrating because unlike natural resources or the education system, tax policy is something state lawmakers can change immediately.

Just because a state has a corporate income tax doesn’t mean it can’t do well in the Tax Foundation metric, according to Cammenga. Missouri is doing well, with a rate around 4%; New Jersey’s, meanwhile, is the highest in the United States at 11.5%.

“Yes, it’s partly because of a temporary surtax, but that surtax was temporary before and it’s been extended now, so ‘temporary’ is always a dangerous word in the world of tax policy,” Cammenga said. . “New Jersey has been at the bottom of the list for many years now, which is unfortunate because tax policy really does make a difference in terms of the state’s competitiveness.”

Cammenga pointed out that New Jersey has four different tax brackets for businesses, which all other states don’t — and that ends up having a deleterious impact.

“Instead of only income above that bracket being taxed at that rate, once a business crosses that threshold, all of its income is taxed at that rate, which makes New Jersey far less competitive than other states, in that sense,” she said.

Is there hope for the Garden State? The fact that there are two states with worse corporate taxes than New Jersey (Oregon and Delaware) might suggest this, but then there’s this lowest overall ranking that gives Cammenga pause.

“It’s very important to know how much states collect, but it’s also important to know how they collect these taxes, because different taxes will have different effects on the economy,” she said.

Patrick Lavery is a reporter and anchor for New Jersey 101.5. You can reach him at [email protected]

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