Tax hike still a fear for CPAs, attorneys

During the campaign, independent Chris Daggett proposed expanding the sales tax to personal, professional and household services — and business groups want to make sure the idea doesn’t outlast Daggett’s candidacy.

Due to the structural deficit the state is facing, any tax-hike proposal raises concerns for the state’s architects, engineers, accountants and lawyers, said Arthur Maurice, senior vice president of the New Jersey Business & Industry Association.

“There will be elements of the Legislature that will be looking for revenues to tax our way out of” the deficit, Maurice said.

Daggett’s campaign estimated the tax would raise $3.9 billion to help close the state’s projected $8 billion deficit. His plan also proposed lowering property and income taxes.

Maurice said tax proposals to close deficits take on a life of their own once they are put forward. For example, he said, once the state’s Unemployment Insurance Trust Fund was seen as a source of funding, governors and legislators regularly used it to balance the budget. Now, state employers are facing steep tax increases to restore the fund.

Now, the goal is to “drive a stake through the heart” of the sales tax proposal, Maurice said.

Maurice said NJBIA officials have been talking with lawmakers about their concerns, recalling the last debate over taxing services that occurred early in Gov. Jon S. Corzine’s term.

A fundamental concern about the sales tax is that residents can easily decide to pay for such services in states that don’t have the tax.

If the government does expand the 7 percent sales tax to professional services, it would follow the expansion of the sales tax to certain services in 2006. That change affected a range of industries, from storage and parking to investigative services, tanning salons and health clubs.

Many businesses affected by that change are still reeling, said Barry Lefkowitz, executive director of the Limousine Association of New Jersey.

“It was devastating,” he said of the effect on limo drivers. “That tax put New Jersey operators in harm’s way.”

Lefkowitz said the limousine industry will contract by 15 percent to 20 percent during this recession, with some of the businesses closing due to the tax.

“There’s no question that it was the nail in the coffin of some of the operators,” he said.

The sales tax proposal prompted concern from Robert J. Traphagen, president of the New Jersey Society of Certified Public Accountants.

“It would be an across-the-board cost that would be passed along to the consumer,” said Traphagen, managing partner of Oradell-based Traphagen & Traphagen CPAs LLC.

Traphagen said New Jersey service business owners already contend with personal and corporate income taxes that rank high nationally.