Business Climate Analysis Shows NJ Remains Last in Region
The New Jersey Business and Industry Association’s (NJBIA) 2023 Regional Business Climate Analysis shows New Jersey last in the region by a wide margin in terms of business taxes and cost competitiveness.
The analysis, found here, shows New Jersey maintaining the highest corporate business tax rate and property tax paid as a percentage of personal income, while also having the second highest top income tax rate, sales tax, and maximum unemployment insurance tax contribution per employee among nearby states.
Each year, NJBIA analyzes six individual business cost drivers in seven states. Using a scoring system of those metrics, New Jersey ranks last overall behind New York, Massachusetts, Connecticut, Pennsylvania, Delaware, and Maryland.
New Jersey’s overall business climate score (11 points) was the weakest for the fifth straight year.
Maryland (34) replaced Delaware (31) to have the top score. Pennsylvania also had 31 points, followed by Connecticut (25), Massachusetts (19), and New York (17).
Compared to the six other states, New Jersey has the top corporate business tax rate in the region and in the nation at 11.5%. While a 2.5% CBT surcharge is expected to sunset at the end of 2023, a remaining 9.0% CBT rate would still be larger than the second highest, Pennsylvania.
The Keystone State reduced its CBT rate from 9.99% to 8.99% on January 1 and is also on a trajectory to decrease its rate by 0.5 percentage points each year until it reaches 4.99% in 2031.
Compared to the six other states, New Jersey also has the top property taxes paid as a percentage of income at 4.80% – but it should be noted that this rate is lower than the 4.98% from a year ago.
New Jersey’s top income tax rate of 10.75% has been surpassed by New York’s top rate of 10.9% for the second consecutive year.
Massachusetts currently has the top minimum wage rate of $15 per hour. However, Connecticut’s current $14 rate will increase to $15 in June. New Jersey’s current minimum wage of $14.13 is the third highest in the region.
To continually seek ways to improve this research, NJBIA slightly adjusted the state sales tax metric to account for states where local sales taxes are applied in addition to state rates. As a result, New Jersey finished with the second-highest rate at 6.6% – an improvement from last year in this category and a good distance behind New York’s 8.52%.
NJBIA also adjusted its unemployment insurance tax category to represent the maximum UI contribution per employee, which is calculated by multiplying each state’s taxable wage base and maximum tax rate.
With this metric, New Jersey is the second highest at $2,122.8. Massachusetts has the highest maximum UI contribution per employee at $2,433.