Not surprisingly, many small business owners are bottom-line people. When it comes to government actions, they prefer to put aside the flowery rhetoric and fuzzy political promises for bottom-line public policies. That is, are these steps being taken by government going to be good for the economy and business or not?
In New Jersey, decades of misguided policies have taken a real toll on entrepreneurship, investment and the state’s economy. Many reasons exist why New Jersey has scored poorly on the Small Business & Entrepreneurship Council Small Business Survival Index ranking states according to their policies affecting entrepreneurship. On the most recent Index, New Jersey ranked an abysmal 50th among the 50 states. Only Washington, D.C., fared worse.
Judging by another budget battle completed at the end of last month, a majority of state legislators still fails to grasp government costs damage the state’s competitive position.
However, New Jersey Gov. Chris Christie is fighting the good fight for the bottom lines of small businesses and the state economy.
Consider that despite having one of the highest state personal income tax rates in the nation at 8.97 percent, state legislators voted to jack up the top rate on high-income earners to 10.97 percent. This was pure class warfare politics, ignoring how high tax rates negatively affect incentives for taking risks and hit the bottom line of small businesses.
Christie vetoed this tax increase.
A news release from his office pointed out: “The proposed income tax hike would directly hurt small business and exacerbate the volatility of New Jersey’s revenue base, considering that 71 percent of the taxpayers who pay the top tax rate under this legislation report income from business activity and nearly 42 percent of the revenue subject to this tax increase represents business income.”
As for government spending — which has been the key problem in terms of draining resources from the private sector, driving up Garden State taxes and threatening even higher taxes in the future — Christie exercised his veto pen to cut nearly $1 billion from what the Legislature sent him in the 2011-12 budget.
Christie declared: “Let me be clear — New Jersey is only going to spend the money we have. We are not going to revert back to business as usual and undo all the progress that has been made to improve New Jersey’s long-term fiscal health. The actions I have taken today reinforce a commitment to protecting taxpayer dollars, safeguarding critical priorities like education and rejecting tax increases that impede economic expansion and job creation.”
Christie deserves great credit for working to get the New Jersey budget mess under control. But the governor and New Jersey’s individual and business taxpayers desperately need the State Legislature to reverse course. Lawmakers must start implementing policies that reduce state taxes, regulations and spending to make the Garden State an attractive place to start and build businesses, invest and create jobs.
Raymond Keating is chief economist for the Small Business & Entrepreneurship Council, an advocacy, research and training organization based in Washington, D.C. Reach Keating through the Internet Web site located at www.sbecouncil.org.