Small Businesses Responsible for Half of NJ Jobs

In Action on Small Business

By Nicole M. Sandelier, NJBIA Policy Analyst On Jul 3, 2018

New Jersey small businesses play a big role in the state economy even as the burden of taxes, regulations and mandates are increasing. According to the Small Business Administration (SBA), firms with fewer than 500 employees account for 1.8 million jobs in the Garden State, about half of the entire private-sector workforce. 

Last year’s state tax reforms made the small business climate more competitive due to the indirect effects of the estate tax repeal, but small businesses are facing the potential of additional business costs and challenges in 2018. 

Paid Sick Leave. This year, New Jersey enacted a statewide paid sick leave mandate requiring virtually all businesses to provide 40 hours of paid sick time per year. NJBIA had fought against this proposal for years because, among other reasons, it hits small businesses the hardest. Realistically, it’s a lot easier to cover for an unplanned absence when a company has 1,000 employees than it is for the small business owner who only has a dozen workers. 

Nevertheless, NJBIA was able to secure some important amendments before the bill was signed. First, state law will pre-empt the 13 local ordinances adopted over the last few years. This means businesses have to abide by only one set of rules. 

Legislators also agreed to allow existing paid time off plans to stay the same if they could satisfy other requirements in the bill. Thus, companies that have paid time off banks do not have to add time designated specifically for sick leave as long as they follow the rest of the rules in the law. The bill sponsors also agreed to reduce the annual leave time to 40 hours a year instead of 72 hours.

Millionaires Tax. Gov. Phil Murphy included a “millionaires tax” provision in the FY 2019 budget proposal, increasing the top income tax rate to 10.75 percent on income above $1 million. New Jersey’s current top rate is 8.97 percent on income over $500,000.

The millionaires tax increase would directly impact small businesses – many of them sole proprietorships, partnerships LLCs and S corporations – that flow their business taxes through their personal income tax returns. It would impact nearly 5,000 businesses that accounted for more than $1 billion in Adjusted Gross Income (AGI) in 2015. The proposal would also impact nearly 20,000 individuals who account for over $54 billion in AGI.

Minimum Wage. Increasing New Jersey’s minimum wage to $15 an hour is still on the state’s agenda. Small businesses do not have the same ability as large corporations to absorb a huge increase in their payroll. It would not only raise salaries, but also raise payroll taxes. According to a recent study, a $15 minimum wage would cost New Jersey 32,000 jobs over six years.

NJBIA urges lawmakers to make exceptions to the law, including one for small businesses, to keep them competitive and to help protect our private sector economy.

To access more business news, visit NJB News Now.

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