Testimony Before the Committee on Constitutional Reform and Citizens Property Tax Constitutional Convention

September 7, 2006

By Thomas A. Bracken, Chairman, NJ Chamber of Commerce
President & CEO, Sun Bancorp & Sun National Bank

Good afternoon Chairman Kenny, Chairman Burzichelli and members of the Joint Committee on Constitutional Reform. My name is Tom Bracken and I am the president and CEO of Vineland-based Sun National Bank. I am also chairman of the New Jersey Chamber of Commerce. It is in that capacity that I appear before you today.

I first want to commend all of the members of the Committee for tackling this important issue for all New Jerseyans. New Jersey’s skyrocketing taxes, which includes property taxes, are a big reason companies and employees have been leaving or staying away from the Garden State. We all have a vested interest in the outcome of these hearings and the future direction of the state is in your hands.

I have been in business in this state for 37 years. I am appalled at how far our economic climate has fallen. I am extremely frustrated to watch the enormous economic potential of New Jersey continually eroded, rather than nurtured and grown to the prominence it can achieve and deserves.

New Jersey is at a critical juncture when it comes to economic competitiveness. Once the envy of the rest of nation, New Jersey has entered a period of stagnation that we must work together to reverse.

The statistics are alarming. They illustrate how poorly New Jersey fairs when compared to the rest of the United States:

• CEOs from around the nation rated New Jersey as the fifth worst place to do business in a survey conducted recently by CEO Magazine.
• A recent study by the Washington, D.C.-based Tax Foundation revealed that New Jersey has the second worst business tax climate in the nation.
• New Jersey is the sixth most difficult place to operate a small business, according to the Small Business & Entrepreneurship Council’s Small Business Survival Index.
• The Milken Institute ranked New Jersey as having the seventh highest cost of doing business in its 2006 index study.
• As you are well aware and the reason we are here, New Jersey has the highest property taxes in the nation.
• Finally, our combined federal, state and local tax burden is third highest.

I could go on and on, citing statistic after statistic, which illustrates why New Jersey has become a place that corporate executives rarely consider when looking for places to set-up shop. We lose tens of thousands of jobs because we simply do not have a competitive business environment any more.

Our once thriving manufacturing industry has been vanishing for some time, which comes as no surprise to most. However, industries that we felt were ours for the long haul and were our most prized possessions – biotech, pharmaceutical, telecommunications, high-tech – are disappearing at an alarming rate. The headline of a Star-Ledger article from August 6, 2006 says it all – "Jersey’s supremacy going south as biotech research jobs go north."

As we continue to flounder, other states, regions and countries have ramped up their economic attraction and retention efforts. They are taking advantage of our dubious position and rubbing our nose in it by seeking out our best companies and most talented workers.

I have spoken to many accountants throughout the state that touch many of our businesses in New Jersey. They are continually asked by our business owners to analyze attractive offers to move their companies out of state. Universally, what the accountants have advised is that the offers are very economically attractive and over time would be extremely beneficial to these companies. However, they say to uproot and move their organizations would be very disruptive, so they counsel against the moves.

However, the accountants also say that they cannot in good conscience recommend that these companies expand in New Jersey – they say that the expansion would be more favorable outside of the state.

Our businesses have an outstanding reputation for treating their customers well. The members of the New Jersey business community are the customers of our state Legislature and the State of New Jersey. Please start treating our companies like the valued assets they are. This simple step could begin our economic recovery.

Earlier today, I was privileged to attend the unveiling of Governor Corzine’s Economic Growth Strategy, a road map designed to make New Jersey more attractive. It is a plan that will hopefully spur job growth and economic revitalization.

The Governor and his team have spent countless hours developing this plan. It is well thought out and should cure many of the ills that have been plaguing the state.

On leaving today’s announcement, many of my counterparts were in agreement that this whole plan unveiled by the Governor would be worthless if the members of the New Jersey State Legislature move forward with plans to change the uniformity clause of the constitution and tax employers at a higher rate than residential taxpayers.

Changing the uniformity clause to allow additional taxes to be placed on employers is simply shifting the tax burden from residents to our already overtaxed and hurting companies. That is not true reform – it is merely lowering one group’s taxes and raising another’s.

Employers already pay more than their fair share in property taxes. In fact, they are responsible for between 30% and 38% of all property taxes collected in New Jersey, yet they are not eligible for the rebates many residential property taxpayers receive. In addition, businesses have no impact on the local school districts – the largest component of all municipal property tax bills.

If this disastrous scenario becomes reality, it could be the final nail in the state’s economic coffin. As I stated earlier, New Jersey is already losing tens of thousands of high paying jobs due to the state’s high operating costs and they are not being replaced by similar, attractive positions. This is according to Rutgers economists Jim Hughes and Joseph Seneca.

In fact, the new jobs being created are lower paying service sector ones – jobs that do not require college degrees or will tempt our children and the best and brightest to stay here and settle down. They will leave for places where there is greater economic opportunity and where growing companies have made long-term investments.

New Jersey is at a critical economic juncture and if the Legislature decides to travel down the politically easy road of merely shifting the property tax burden to business, you could very well be making one of the worst economic decisions in the state’s almost 400-year history. I know this sounds extremely ominous, but the stakes are really that high.

Before seriously contemplating shifting the property tax burden to business, please examine the areas where the true problems lay – the areas of pensions, consolidation of government and the reduction of spending. That is in the best interest of the state and its residents in the long run.

Businesses such as mine that have faced challenging financial situations have taken difficult and unpopular steps to stem or reverse sagging profits. Or, as in the case of the State of New Jersey, to reduce the deficit. They cut expenses from every department – no matter how small because the sum of the cuts ends up being meaningful dollars.

As has been said many times, New Jersey does not have an income problem. It has an expense problem. Something has to be done to reduce, not shift expenses. It takes courageous corporate leadership to cut expense. Unfortunately, a lot of times this means cutting jobs. I can tell you that this is not popular. It is not fun. It is not easy. But, the end results are often securing the remaining jobs and saving companies – enabling them to grow and prosper.

There are many examples in corporate America of what I just talked about. What we need now is courageous and intelligent legislative leadership. It is not too late to save this great state. However, that can only be done when cutting expense, not shifting expense, becomes mandatory.

In closing I ask you to remember and stick to your mission. That is to reform the property tax and make our state a better place to live and work than it is today. Please solve the property tax crisis without sacrificing our economic future. Address the property tax issue through true reform – not through slight of hand tax policy. Please lower property taxes without jeopardizing our economic future. Thank you.

Thomas A. Bracken is chairman of the New Jersey Chamber of Commerce and chairman and CEO of Sun National Bank.

September  2006