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A new report ranks New Jersey last among seven Northeast and mid-Atlantic states for business climate, marking the eighth consecutive year it has finished at the bottom of the list.
The New Jersey Business and Industry Association analysis found Pennsylvania had the region’s friendliest business climate, while Delaware ranked third.
The report looked at New York, Connecticut, Massachusetts and Maryland, as well.
Taxes and costs drive ranking
Chris Emigholz, chief government affairs officer for the New Jersey Business and Industry Association, or NJBIA, said the analysis looked at six factors that affect the cost of doing business, including corporate, sales, income and property tax rates, payroll tax rates, and the state minimum wage.
“We are the worst in the region in two of these factors: property taxes and corporate taxes,” he said.
The analysis found New Jersey has the top corporate tax rate, at 11.5%, and the highest property tax paid as a percentage of personal income, at 4.38%, in the region.
Each state was given a score between 1 and 7, from least competitive to most competitive, for each factor considered in the report. New Jersey’s overall business climate score was 12 points, making it the least competitive state. Pennsylvania, which was third overall three years ago, finished in the top spot for a second straight year with a score of 34.
“Pa. actually has the lowest minimum wage rate in the region. They have the lowest income tax rate in the region. They’re also much more competitive in some of these other factors,” Emigholz said.
He noted that Pennsylvania’s 7.49% corporate net income tax rate will continue a downward trajectory to 4.99% by 2031.
The report ranked Maryland, with 32 points, as having the second-best business climate in the region, followed by Delaware, with 31 points, then Massachusetts with 22 points, Connecticut with 17 and New York with 16.
Michael Busler, a professor of finance at Stockton University, said New Jersey’s high taxes have a negative effect on businesses.
“That typically results in employers having to pay them more, because the employees look at: ‘How much is my disposable income after taxes?’ That’s really what [they] have to spend or save,” he said. “With all that, it makes it very hard for businesses to expand in New Jersey.”
Busler said another cost driver for businesses in the Garden State is its regulatory environment.
“Businesses buy land and then find out they can’t build on a lot of it because of environmental concerns, so they have to buy more land, which drives up the cost of doing business,” he said. “We’re all concerned about the environment, but have they gone too far? It’s an area of concern.”