It's taxing doing business in N.J.; State's national ranking is 3rd lowest
BYLINE: By HEATHER HADDON, Herald News, North Jersey Media Group
The father and son team at RNR Truck Repair roll open their garage door at 7 a.m. in Paterson. Rich Pocsi, Sr. and Jr. stay busy overhauling transmissions until 5 p.m., and while they would love to hire more help, the Pocsis have soured on investing in New Jersey.
"We could make our business grow, but at what cost?" asked Pocsi Sr., 53. "If we didn't have family and clients in New Jersey, I would get out of it."
Pocsi and many other local business owners say they are fed up with the costs of doing business in the state. A report released Wednesday by a national tax group echoed their pain, finding that New Jersey's business taxes are the 48th worst in the nation.
Some economists, however, don't paint such a dire picture.
"We look at whether businesses can come and grow and be part of the overall fabric of the economy. New Jersey does do well in this," said Beadsie Woo of the Corporation for Enterprise Development, a national research group, in an telephone interview from North Carolina.
The Tax Foundation, a nonprofit group based in Washington D.C., studied the tax systems in each state as part of their annual survey. New Jersey ranked high in every tax category — from corporate to sales. Its individual and property taxes were some of the nation's worst.
New Jersey has ranked in the bottom four states since the Tax Foundation began the survey four years ago. Chris Atkins , an attorney for the group, said the state's prognosis is getting worse.
"They seem to be going in the wrong direction," said Atkins, pointing to this year's 1 percent sales tax increase.
Despite the challenges, New Jersey is still attracting business. The state ranked second in the nation for business creation over the past five years, increasing by 26 percent, according to Woo's research.
The report also found, however, that the state had the third highest rate of business closings, with 19 percent of firms folding, according to the 2006 data.
Gov. Jon S. Corzine has begun addressing the state's economic issues, passing the first reduction to net business taxes in six years, according to Brendan Gilfillan, a spokesman. The legislation reduced taxation rates of certain corporations by .66 percentage points, and allowed for full write-offs of operating losses, and eliminated one cuts eliminated.
Corzine also unveiled an extensive economic growth initiative last month.
But despite its efforts, New Jersey is competing against states with lower taxes and budgetary surpluses. Ten states are now using their extra funds to attract businesses through financial incentives, Atkins said.
Ron Bassano of Bassano Printing, a Hawthorne-based company, said he has watched many other local printers move to North Carolina and other low-tax states.
"Even large printers are moving," said Bassano, 63, a printer for more than 40 years. "It's just not easy."
Gerardo Gaeta of Coliseum Haircutters said he's lost a steady stream of his clients after their companies left New Jersey or their property taxes got too high.
Gaeta's own property taxes on his Clifton shop have ballooned to $9,000 a year. That's on top of the $8,000 a year he pays annually for his Little Falls home.
"We have had to raise the prices," said Gaeta, 59. "You can only get so many new clients."
At RNR Truck Repair, the Pocsis pay almost $5,000 a year in property taxes. But they are particularly overwhelmed by all the other fees, some with codes they can't decipher. "We don't know what Plan 4F is, but we have to pay it," Pocsi Sr said. "It just doesn't make sense."
RNR Truck Repair does business with large fleets, including UPS and Verizon. They gross between $40,000 and $45,000 a month, but much of that is swallowed by costs and taxes, the Pocsis say. There is $3,400 for rent, $400 for property taxes, about $1,300 in sales tax on goods, insurances and social security expenses, and a recent $2,200 bill for a workers compensation incident.
They must pay sales tax on services each month, regardless if the bill has been paid yet — or ever, in cases when a client never pays.
Other states do more to write off sales taxes on equipment expenses, Atkins said. "If you want your economy to grow faster, you need to take a serious look at reforming these taxes," he said.
New Jersey provides tax credits and deductions for businesses that move to the state, create new jobs and focus on research. Firms located in the state's Urban Enterprise Zones — like Passaic and Paterson — can purchase supplies tax-free and receive other big benefits.
But sometimes businesses, especially small ones, aren't informed about what's available to them.
"We've paid for everything through funds from our parents," said Krystal Lassiter , who founded a day-care center in Paterson two years ago. Lassiter did not get Urban Enterprise credits or other tax breaks that she knows of.
The Tax Foundation thinks states should give out fewer credits and reduce taxes across the board. That's unlikely in New Jersey because of ongoing budgetary problems.
Pocsi Sr. feels under attack by New Jersey's business policies. He had a simple message to officials.
"Let's start working together," Pocsi Sr. said.
BUSINESS RESOURCES
New Jersey offers many services for small businesses and entrepreneurs, including grants, training and loans. The following are some key contacts:
New Jersey Economic Development Authority – Provides training and low-interest loans. Call 609-292-1800.
Urban Enterprise Zones - Provides a wealth of tax credits and exemptions. For Passaic, call 973-365-5520. For Paterson, call 973-321-1212.
Business Employment Incentive Program – Provides tax breaks to businesses that come to the state or create jobs. Call 866-534-7789.
General Business Advice - Call 866-534-7789 or visit www.nj.gov/njbusiness.
Reach Heather Haddon at 973-569-7121 or haddon@northjersey.com.