THE STATUS QUO HAS BEEN eliminated by a Trump-driven, federal tax law and a progressive economic agenda from New Jersey Gov. Phil Murphy. The consequences—pro and con—are real and every business must prepare for the avalanche of changes coming straight for their bottom line. Seeking expert advice from accountants, banks, lawyers and industry associations is the wise move given the nature and scope of change being implemented at the federal and state levels. COMMERCE asked the following panel of experts to opine on the evolving business climate in the nation and in New Jersey.
- NJCPA CEO & Executive Director, Ralph Albert Thomas;
- New Jersey Bankers Association, President and CEO, John E. McWeeney, Jr.;
- Valley National Bank President and CEO Ira Robbins;
- Sills Cummis & Gross P.C. Managing Partner Max Crane, Esq.;
- PKF O’Connor Davies, LLP Partner Joseph A. Fazio, CPA, CGMA;
- New Jersey Hospital Association President and CEO Cathy Bennett;
- New Jersey State Nurses Association, President Ben Evans.
Ralph Albert Thomas, CEO & Executive Director
“Some of the new federal tax changes—i.e. lower corporate and individual tax rates—are good for the state and will hopefully encourage companies to keep their headquarters in the United States instead of chasing lower rates by moving overseas,” says Thomas.
But one glaring change isn’t good for the state—beginning in the 2018 tax year, individuals generally can’t deduct more $10,000 of state and local taxes (SALT) on their federal income tax return. “Many New Jersey residents bump up to that limit just from their property taxes,” he explains.
“To consider that and other issues, I was asked to join the bipartisan Economic and Fiscal Policy Working Group— created by State Senate President Steve Sweeney and led by State Senators Paul Sarlo and Steve Oroho and Assemblyman Lou Greenwald—that is examining how to make New Jersey more attractive, and how to align the goals of the state and federal governments; and of course, to see what may be done about the new federal SALT limits.”
New Jersey Bankers Association
John E. McWeeney, Jr., President and CEO
President Trump’s policies have generally been viewed as positive by banks and their business clients, according to John McWeeney, president and CEO of the Cranford-based New Jersey Bankers Association. “He’s aggressively trying to reduce burdensome regulations, which swung too far with the Dodd-Frank Act. We’re also encouraged by the bipartisan backing for Senate Bill 2155, which proposes regulatory relief for community and regional banks. It reflects a new tone of regulatory balance in Washington, D.C.”
Trump’s tax reform is a “big plus for businesses of all sizes,” he adds. “They may pay less in corporate taxes and will have the opportunity to reinvest in their own business and in employees.”
Closer to home, bankers want to work with Gov. Phil Murphy, “because we all benefit when the economy is strong,” McWeeney notes. “But we are concerned about his proposal to establish a state bank. This could be catastrophic for New Jersey’s community banks, since the state bank may take government deposits, which currently are placed with community banks. If a state bank takes those deposits, local banks may not be able to do as much community lending, and may not be able to maintain the level of support they currently provide to their municipal customers—often at no charge.”
Valley National Bank
Ira Robbins, President, CEO
“Lowering the tax rate on businesses to levels that are competitive with other parts of the world seems like a no-brainer,” according to Robbins. “It will stimulate investment in the country, and that is beneficial to all stakeholders. For households, surveys of consumer confidence are at or near the high of this business cycle. We are starting to finally see a meaningful pickup in wage growth, which is expected, given how tight the labor market is; this bodes well for consumer spending going into the remainder of the year.”
But the SALT (State and Local Tax) deduction, which places a cap on state income tax and property taxes, “could impact the real estate market,” he adds. “Valley provides a large portion of financing to the real estate industry, particularly in the Northeast. While it appears to disincentivize homeownership in these types of markets, it does bode well for real estate operators with rental properties.”
Overall, Robbins says he’s cautiously optimistic. “On balance, the impact to a regional bank such as Valley is minimal. The reduction in the overall tax rate, however, will fuel our ability to reinvest in the bank—items supporting our technology roadmap and enhancing our incentive compensation program.”
Sills Cummis & Gross P.C.
Max Crane, Esq., Managing Partner
“President Trump has loosened some burdensome regulations, which is good for businesses,” explains Crane. “Generally, more regulations mean more activity for law firms. On the flip side, Gov. Murphy has indicated he wants more government involvement in a variety of areas, such as the environment and labor laws.” Gov. Murphy has also talked about expanding access to medical and recreational marijuana. “Implemented in a responsible way, this could represent a new source of revenue for businesses and for law firms,” says Crane. “Sills Cummis entered this area early; in 2015 we launched our venture capital-regulated substances practice. Sills Cummis Co-Founder Clive Cummis was involved in the early efforts to legalize gaming in New Jersey, and casinos had a rogue reputation initially, but became a sizable part of the state’s economy.”
Changes to the federal tax code, including accelerated depreciation and lower corporate tax rates, should mean more money for businesses, “which will ultimately benefit our consumer-driven economy,” says Crane. But “new limits on individuals’ deduction for state and local taxes (SALT) is not good for many New Jersey residents. We recently hired a SALT expert to serve this new business.”
PKF O’Connor Davies, LLP
Joseph A. Fazio, CPA, CGMA, Partner, Chair, Tax Committee
“As far as the federal perspective, the business environment is positive,” says Fazio. “President Trump is pro-business, and several provisions of the new tax act will provide opportunities for businesses to reinvest in their operations and their people. Also ‘C’ corporations will benefit from the lower tax rate of 21 percent, down from the previous 35 percent maximum.” Before switching from a pass-through structure to a C corporation, they “need to work with their accountant and tax advisor to analyze all the issues.”
Many small- and medium-sized pass through entities may benefit from the 20 percent federal deduction for qualified business income, he adds.
“Additionally, the expansion of bonus depreciation will generally let companies take a 100 percent first-year deduction on the purchase of eligible business property.”
But Gov. Murphy’s “progressive approach” may not be as business friendly.
“Proposals such as increasing the state’s minimum wage to $15 an hour, and statewide mandatory sick leave only add to New Jersey’s reputation for not being business-friendly,” Fazio says. “We already have high property and other taxes.” A push for a Millionaire’s Tax on top of that “may cause some individuals and businesses to question whether they should stay in New Jersey.”
New Jersey Hospital Association
Cathy Bennett, President and CEO
“We appreciate Gov. Murphy’s interest in good health and quality healthcare for the people of New Jersey,” says Bennett. “He has focused a great deal on innovation, and that mirrors the work of the healthcare provider community.”
The NJHA is also focused on “innovative approaches to care delivery, like High Reliability Organizations and quality improvement models that make care better, while reducing costs.” Bennett wants to work collaboratively on social determinants of health, along with policy issues that impact coverage and reimbursement in New Jersey’s Medicaid program.
On the federal level, the NJHA is “very concerned about regulations that are systematically chipping away at healthcare coverage for New Jerseyans, as well as important programs that help hospitals and other healthcare providers care for their communities,” explains Bennett. One example: recent cuts to the 340B Drug Discount Program.
“This program allows safety net hospitals to purchase certain pharmaceuticals, such as chemotherapy drugs, at a discounted price so they can better care for their underserved populations,” Bennett says. “This is a critical issue for New Jersey—especially in communities with low socio-economic profiles—and we would hope the Trump administration and the pharma industry could be partners in their well-being, rather than cutting this program.”
New Jersey State Nurses Association
Ben Evans, President
“Gov. Murphy’s approach to healthcare has not been made clear yet,” says Evans.
“He has included nurses in his transition team, which is encouraging, as the previous administration was not favorable to nursing. It is our hope that Gov. Murphy and his administration will be open to working with nurses to ensure the health of all citizens.”
The NJSNA is working on issues such as “problems at the Board of Nursing that are impacting the practice of nursing and patients,” he adds. The organization also wants to repeal language prohibiting the federal Centers for Disease Control and Prevention from studying the impact of gun violence on the healthcare system; and it supports earned sick days for all New Jersey workers “as a public health issue to prevent the spread of viruses and other illnesses.”
Evans says it is “imperative” that nursing associations such as the NJSNA closely monitor healthcare issues and “in addition to monitoring, nursing associations must act, speak and advocate from nursing’s unique perspective in healthcare.”