Closing a tax loophole will help business and grow N.J.'s economy

For years, all you needed to dodge corporate taxes in New Jersey was an empty room in Delaware and a really good accountant.

That's simplistic, but essentially true: Multistate corporations used a legal tax-avoidance strategy that cost our state at least $200 million annually – just by shipping profits to out-of-state subsidiaries - but now the Legislature trying to close that loophole.

The Senate filed a bill (S-61) that would enact a "combined reporting" tax law, which eliminates the shelter. It's long overdue, and if it wins the governor's signature, we'd be just like 25 other U.S. states, including that neon-red, pro-business district known as Texas.

It will be attacked as a blow against business, but repeat after Sen. Raymond Lesniak (D-Union): "It's just tax fairness," he says.

The bill sponsor added that he expects bipartisan support, and there is actually a Republican bill in the Assembly that also reduces tax sheltering. As for support from Gov. Christie, Lesniak says, "It's hard to justify not closing a loophole for multistate corporations and depriving the state of $200 million in yearly revenue."

And that's a revenue boost that New Jersey can really use now.

As for whether it will drive business away, consider a New Jersey Policy Perspective report that 92 of New Jersey's 98 largest employers are already located in at least one state that has combined reporting. So the corporations have no hole card to play: They'll have to pay full freight here, just as they do in other states.

Or consider General Electric's recent move: CEO Jeff Immelt threw a corporate tantrum when Connecticut adopted combined reporting in June, threatening to move his headquarters. Then he announced last week that he's taking 800 jobs out of Fairfield and moving them to Boston, where (go figure) they already had combined reporting. In fact, Massachusetts also has higher taxes.

So you can't blame NJPP analyst Sheila Reynertson for this conclusion: "There is no better evidence of the benign economic development impact of combined reporting than the continued willingness of major multi-state corporations to maintain operations in combined reporting states."

The New Jersey Chamber of Commerce has yet to take a position on combined reporting, but in an interview last June, president/CEO Tom Bracken saw the folly in "allowing businesses to avoid paying taxes in a state where they are domiciled with most of their employees – that's ridiculous."

And a checkmate benefit is that it helps small businesses. The small, local retailers pay taxes on all their profits, because unlike a multistate business, they don't have the legal muscle to set up that out-of-state subsidiary where they can shift those profits. Combined reporting will eliminate their competitive disadvantage, because bigger companies can no longer move profits and undercut the prices of the small companies.

It's a win all around, especially for a cash-strapped state. Hopefully the governor agrees.        

Original Article

TROY SINGLETON
ASSEMBLYMAN, 7TH DISTRICT
400 NORTH CHURCH STREET, SUITE 260
MOORESTOWN, NJ 08057
 
Tel: 856-234-2790
Fax: 856-234-2957
Email: AsmSingleton@njleg.org