(The Center Square) (January 31, 2023)–— New Jersey has the nation’s highest top statutory corporate tax rate, according to a new Tax Foundation report.
The Garden State is one of 44 that charges corporate income taxes, which the Washington, D.C.-based nonprofit says accounted for 7.07% of state tax collection and 4.04% of state general revenue in fiscal year 2021.
New Jersey’s 11.5% top marginal corporate tax rate is the highest in the nation for the upcoming tax year, followed by Minnesota, at 9.8% and Illinois at 9.50%, according to the report.
Conversely, the report noted that North Carolina’s flat rate of 2.5% is the lowest in the country, followed by rates in Missouri and Oklahoma, both at 4%.
Nationwide, the collective percentage of corporate taxes in fiscal year 2021 represents a “substantial increase” over previous fiscal years.
“Corporate income taxes accounted for 2.26% of general revenue in FY 2020, which is more in line with historical norms,” the report’s authors wrote.
Economists view corporate income taxes as double taxation, the foundation noted, with workers, shareholders and consumers bearing the burden.
“The same income is taxed once as profit and once as individual income when distributed as dividends to shareholders,” the foundation said.
Despite New Jersey’s high tax burden, there is potentially good news on the horizon with Gov. Phil Murphy saying recently, residents can expect “significant tax cuts” even after the state passed a $2 billion property tax rebate program last year.
The Democratic governor has said he also plans to let a 2.5% surcharge on the state’s corporate business tax expire. The surcharge has been in place since 2018, and is set to sunset this December. If that happens, New Jersey’s corporate tax rate will drop to 9% in 2024.
State business leaders have for years cited the need to lower taxes to prevent an exodus of businesses and workers fleeing for lower tax states.
New Jersey lost an estimated 6,000 residents between July 2021 and July 2022, according to U.S. Census Bureau data.
Christopher Emigholz, a lobbyist for the New Jersey Business and Industry Association, said the Tax Foundation’s research shows the state remains a “negative outlier in costs and affordability” with the highest corporate tax rate in the nation by far and the only state in double-digits.”
But he said the pledges of letting the corporate tax surcharge lapse are “good news” and means the state “will no longer be the worst.”
