TRENTON, NJ. January 21, 2018: NJ Politics is ripe with unique taxing issues that result from being a high wealth bracket economy.
The tax code is designed to help business development. Well in most states. The Trump Agenda of instituting across the board tax cuts to prepare the economy for its eventual expansion period is was officially implemented in December of 2017. States like New Jersey seem inclined to follow.
Bramnick brings bills to cut taxes
That is if Republicans can wrangle a few bills out of committee and unto the desk of the new Democratic governor. Two bills in particular sponsored by Assemblyman Jon Bramnick would require NJ to tax individuals less. A1949 lowers income tax rates and A1947 eliminates the minimum S-corp tax.
Bramnick said, “For too long, Trenton has debated which tax to increase, but now it looks like we’re going to have a serious discussion about which tax to reduce.”
Freshman season is the best time for seasoned legislators to have their way if you will with the new executive branch. Fresh faces mean that things may be unfamiliar and fast acting tenacious legislators with a good public service agenda can capitulate any governor to key constituencies in NJ Politics. The business community being chief among those constituencies.
NJ Politics had a pro-business mantra
Christie was a pro-business governor. One of Chris Christie’s earnests gripes with the business community was its lackluster support of key Republican races in the state. Many of which could have turned the tide for a Republican majority in either the Senate where Democrats lead 24 to 16 or the Assembly where they lead 54 to 26.
NJ’s business community inevitably extracts business-friendly policy required by industry through other levers. With such an uphill funding battle required to force a turnover in the majority party, business interest may be better served by keeping leverage on the executive branch. Murphy’s anti-Trump stance may soon be replaced by a more toned down rhetoric as the reality of governing and the rigors of NJ Politics set in.
The all too common reality is that the governor eventually realises that governing is twice the battle winning the initial election is. Now they have to contend with the ebbs and flows of public opinion. In NJ Politics, that could and often does change rather frequently. Leaving what was once a popular politician out in the cold for one false move. Business leaders hold at risk countless political futures of because of the dicey nature of NJ politics.
Wheeling and dealing aside a $50,000 annual legislative salary is not much to get by on. This makes NJ politics ripe for profiteering unless the they are independently wealthy.
This bill really helps small home-based businesses. Projects in their first five years of operating probably won’t turn a profit. Eliminating the minimum tax or even the filing requirements for the first five years makes a big big difference i a sustainability for small home-based businesses.
The bill sponsored by Assemblyman Jon Bramnick, a veteran of NJ politics, eliminates the minimum tax on S-corps. S-corps are a hybrid of Limited Liability Company (LLC) and Equity driven C corporations (C-corp). S-corp status is essentially an election to taxing authorities made by corporate stockholders.
On the federal level, S-corps serve as a pass-through entity. Meaning tax liability passes through to the individual and is not paid by the business entity itself. The income or loss is reported on an individual’s personal income tax. There are a few requirements to be considered an S-Corp for Federal tax purposes. Like one class of stock, no more than 100 shareholders and no partnerships or corporation shareholders. Meaning a small close-knit company. You can find more on IRS.gov
Only companies with a federal S-corp designation receive NJ status. That is how NJ Politics works, they usually mirror the federal government. While similar to the Federal S-corp. NJ, however, imposes a tax on the S-corp itself. Which creates the dreaded issue of double taxation. In NJ the minimum tax on all corporations is between $500 – $2,000.
This is in addition to the income tax liability assessed on an individuals personal income. Personal income tax rates range from 1.4%(less than $20,000) to 8.97% (over $500,000).
This is a good bill. It reduces needless regulation. Companies this small are going to pay personal income tax anyway. There is no fiscal estimate for this bill as of the writing of this article. This is a bill the business community lobbying groups like NJBIA and NJBiz usually support.
This is an expansionary fiscal policy strategy. The bill, like the Trump Tax cuts, aims to increase disposable income, putting more money into people’s pockets in hopes of driving up consumer spending. It reduces gross income tax rates by 10 percent over three years. Dropping the top rate to 8.074% from 8.97% retroactive to 2015.
NJ Income tax collections
NJ income tax constitutes the largest revenue source for the state. Equal to 14.35 billion dollars in FY 2018 up 3.6 percent from the previous year. And up from 11.128 billion in FY 2012, without a millionaire’s tax. A tax increase demanded by New Jersey Democrats.
This bill takes into consideration two key factors. One, rate alone does not determine total collection. Two. wealthy people own multiple residences. Easily allowing income tax filing from other states, like Florida, when rates are cheaper. This bill takes these factors into account. It is good for the state economy. Just like the federal tax cuts, they work essentially the same way. Applied to all rates, not just on high-income rates.