BUONO BILL TO MODERNIZE TAX CODE FOR SMALL BUSINESSES SIGNED INTO LAW

April 28, 2011

TRENTON – Legislation Senator Barbara Buono sponsored to provide sole proprietors and other small business owners with a tax cut by requiring the tax code to treat them the same way as it does larger corporations was signed into law today.

The bill was a second attempt by Senator Buono to enact meaningful business tax cuts to spur economic growth and job creation across the state. Prior version of the new law was vetoed by the governor, only to resurface four days later in his budget address.

The new law will help small businesses that do not file through the corporate tax code by giving them many of the same benefits enjoyed by their larger counterparts. Under prior tax law, state gross income taxes were calculated through 16 separately defined categories of income. And, unlike the federal tax code and the tax laws of 48 other states, New Jersey law did not permit small business filers to carry-forward operating losses. The measure consolidates four income categories, and allows a 50-percent “cross-netting” of gains or losses from one category of income to another; the change could be one of the largest small business tax cuts in state history.

“When a big business loses money, the corporate tax code offers them a potentially life-saving break, yet small business owners have no such protection,” said Buono. “This tax disparity becomes even more harmful to the small businesses we will need to grow our economy. Our taxes need to be fair to businesses of all sizes, and not stick to a mistaken model of ‘bigger is better.’ It’s simply a shame that the governor decided to play politics, and made small businesses wait so needlessly for a tax cut they so desperately need.”

Buono said the bill would give small business owners the same ability to recoup losses over 20 years that large corporations currently enjoy. She said the change would encourage entrepreneurs to invest in and establish new businesses by allowing them to balance the losses from those ventures with the gains from their established, profitable entities. If enacted, the cut could potentially be the largest small business tax cut in state history.

"Changing tax policy can spur investment, job retention and growth, but only if it is done wisely," said Buono. "A direct tax cut for small businesses will do much more to reinvigorate the economy than cutting taxes for wealthy individuals with the hopes that the benefits trickle down, which they rarely if ever do."