Oppose the McGreevey Tax on Investment Clubs!

One of the largest tax increases recently proposed by Governor McGreevey, introduced deceptively as a Processing Fee, is a new tax on entities treated as partnerships. This includes partnerships, LLCs, and LLPs. Every such entity with more than two partners will be subject to a $150 per partner fee. This is a new tax on people who already pay individually upon the profits of these entities.

Think of all the small investment clubs that will be paying this $150 per partner tax. How many investment clubs will now be paying thousands of dollars in new taxes when they are only passing through hundreds of dollars of investment income? How many small real estate investment LLCs will now be subject to a tax they never anticipated?

When New Jersey set up LLCs and LLPs, there was an implicit understanding that the individual owners would be taxed at one level of taxation. There would be no entity level taxation. That is why our state's economy grew so rapidly in the 1990s. We offered a simplified set of tax rules, few tax traps and a single level of taxation for most small business owners. Today, the Governor attempts to violate that agreement with a last-minute proposal.

Taxes should be assessed on some theory of ability to pay. This "Processing Fee" clearly violates that premise. If the Governor believes he needs more money, he should be brave enough to request a small increase in major taxes and not disguise the increase through an unfair new tax.

I urge everyone to call the Governor's office (609-292-6000) and oppose this new tax.

E. Martin Davidoff, CPA, Esq.

16 Independence Drive

East Brunswick, NJ 08816

Tel: 732-274-1600