CPAs Views of Current Economic Conditions. Results from a Survey of New Jersey and Pennsylvania Certified Public Accountants

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1 CPAs Views of Current Economic Conditions Results from a Survey of New Jersey and Pennsylvania Certified Public Accountants Prepared for New Jersey Society of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants Prepared by Center for Opinion Research Franklin & Marshall College December 2015 Franklin & Marshall College Floyd Institute for Public Policy

2 Table of Contents Executive Summary... 3 Overview of Findings... 5 United States and State Economic Conditions... 5 Pennsylvania... 7 New Jersey State Differences on Selected Survey Items Trends in Economic Conditions Attachment A: Marginal Frequency Report

3 Executive Summary Overview of Methods The purpose of this survey is to identify the economic, business, and political trends affecting the economies of Pennsylvania and New Jersey according to the certified public accountants (CPAs) residing within each state. This summary provides the responses of 753 Pennsylvania CPAs who are members of the Pennsylvania Institute of Certified Public Accountants and 843 CPAs who are members of the New Jersey Society of Certified Public Accountants. The sample of Pennsylvania CPAs and New Jersey CPAs has an estimated sample error of ± 2.. The data for the survey was gathered in October and November, 2015 by the Franklin & Marshall College Center for Opinion Research. The survey was conducted using an on-line survey platform. The survey instrument, including the responses to each survey question, is included as Attachment A. The survey questions were designed by the staff of the Center for Opinion Research in conjunction with each state s CPA organization. The questions are designed to assess perceptions of the business climate within each state. Survey respondents are CPAs in public accounting. Survey invitations were sent to 2,815 CPAs in Pennsylvania and 3,718 in New Jersey. The survey s major findings about the US government s fiscal health and state economic conditions are summarized below. The results of the survey s other findings appear later in this report. Half (5) of Pennsylvania and New Jersey CPAs believe the economic conditions in the US are about the same as they were one year ago (PA 5, NJ 5). A large majority of CPAs in Pennsylvania and New Jersey agree that numerous factors have had a negative affect on United States economic growth during the past year, including: government gridlock (PA 8, NJ 9) and federal regulations (PA 9, NJ 88%). 3

4 Pennsylvania and New Jersey CPAs are predicting increases in business revenues (PA 5, NJ 4) and salaries for their clients (PA 57%, NJ 4) in the next 12 months, although many predict no change in investments (PA 48%, NJ 5) and workforces (PA 6, NJ 6) in the coming year. A quarter (2) of Pennsylvania CPAs believe the business climate in the state is excellent or good, which is down from two in five (4) in Two in five (3) Pennsylvania CPAs believe the economic conditions in Pennsylvania are worse than they were one year ago and the same proportion (3) expect them to decline over the next year, which is a significant decline since Half (5) of New Jersey CPAs believe the economic conditions in New Jersey are about the same as they were one year ago, and expect them to be about the same one year from now (5), which is not significantly different from Only one in six (1) New Jersey CPAs believe the business climate in the state is excellent or good, which is relatively unchanged since

5 Overview of Findings United States and State Economic Conditions Over half (5) of Pennsylvania and New Jersey CPAs believe the economic conditions in the US are about the same as they were one year ago (PA 5, NJ 5), and most (PA 5, NJ 5) are expecting economic conditions in the United States will be about the same one year from now. A quarter of Pennsylvania and New Jersey CPAs believe government gridlock is the greatest hindrance to economic growth in the United States and more than one in ten believes that economic growth is being hindered by other factors, including federal regulations, entitlement spending and the federal deficit (see Table 1). Table 1. Pennsylvania and New Jersey CPAs Assessments of Economic Growth Do you believe the economic conditions in the United States are better, worse or about the same as they were one year ago? Do you believe the economic conditions in the United States will be better, worse or about the same one year from now? Total N=1596 n = 753 n = 843 Better than one year ago 28% 2 30% Worse than one year ago 1 1 About the same as one year ago Better one year from now 2 20% 2 Worse one year from now About the same one year from now What do you believe is the greatest hindrance to economic growth in the United States? Government gridlock Federal regulations Entitlement spending Federal deficit 1 1 Affordable Care Act 10% 1 Global economy 10% 10% 1 U.S. tax policy 7% 10% Decaying infrastructure Private sector spending Spending cuts Professional skills shortage Corporate inversions 5

6 Half of Pennsylvania and New Jersey CPAs are predicting increases in business revenues for their clients in the next 12 months, although many predict no change in investments and workforces in the coming year. Pennsylvania and New Jersey CPAs believe that salaries will increase in the coming year, but expect benefits to be unchanged (see Table 2). Table 2. CPAs Assessments of Their Client Business Growth in the Next 12 Months Next 12 Months Total N=1596 n = 753 n = 843 Revenue Substantially increase Marginally increase 47% 50% 4 Not changed Marginally decrease 10% 10% 10% Substantially decrease 0% Workforce Investments Salaries Benefits Substantially increase 0% 0% 0% Marginally increase Not changed Marginally decrease % Substantially decrease Substantially increase Marginally increase Not changed 5 48% 5 Marginally decrease 10% 10% 10% Substantially decrease Substantially increase 0% Marginally increase 50% 57% 4 Not changed % Marginally decrease 7% Substantially decrease Substantially increase 7% Marginally increase % Not changed 4 37% 4 Marginally decrease Substantially decrease 6

7 Pennsylvania Two in five (3) Pennsylvania CPAs believe the economic conditions in Pennsylvania are worse than they were one year ago and the same proportion (3) expect them to decline over the next year. This is a significant shift since 2014, when nearly half of Pennsylvania CPAs felt economic conditions were about the same as they were in 2013 (5) and that they would remain about the same in the coming year (4). Pennsylvania CPAs consistently rank pension funding for public employees and rising health care costs as the of the top factors that are likely to hinder future economic growth (See Table 3). Table 3. Issues Facing Pennsylvania Most Likely to Hinder Future Economic Growth in Top Pension funding for public employees Rising health care costs 28% 5 50% 3 High taxes 2 1 0% 0% Regulatory burdens A declining tax base % Deficiencies in basic education Decaying infrastructure Unfunded infrastructure costs Ineffective tax incentive programs Professional skills shortage Other

8 Despite their bleak outlook regarding economic conditions in the state, Pennsylvania CPAs see stable revenue and employment growth in their expectations for the coming year, which are in line with their 2014 expectations (see Table 4). Table 4. Pennsylvania CPAs Assessments of Their Client Business Growth PA Revenue this year Substantially increased Marginally increased % 37% Not changed 27% % Marginally decreased % Substantially decreased Revenue next year Substantially increase Marginally increase 50% Not changed Marginally decrease 10% 7% 10% 1 Substantially decrease 0% 0% 0% Workforce this year Substantially increased 0% 0% Marginally increased Not changed Marginally decreased 20% 1 27% 3 Substantially decreased Workforce next year Substantially increase 0% 0% 0% Marginally increase Not changed Marginally decrease 1 17% 1 Substantially decrease 8

9 Pennsylvania CPAs perceptions of the business climate in the state shifted significantly since In 2015, a quarter (2) believe the business climate in the state is excellent or good, which is down from two in five (40%) in Similar perceptions were reported in 2012 when only twenty-six percent believed the business climate to be excellent or good at the time. A majority of CPAs (67%) believe the state s business climate hinders economic growth, up from 5 in 2014, 5 in 2013, and 47% in Sentiments about state regulations impact on Pennsylvania businesses have remained unchanged since 2014 with nearly half (48%) of Pennsylvania CPAs feeling the influence of unions in pricing and contractor selection have the most negative impact on Pennsylvania businesses (see Table 5). Table 5. What state regulation has the most negative impact on Pennsylvania businesses? Influence of unions in pricing and contractor selection 48% 50% 4 4 Complexity of the state tax code for businesses 20% 2 20% 17% Regulations on environmental protections 1 8% 1 1 Restrictions on which contractors can be chosen for state and municipal projects 8% 1 10% State treatment of distressed municipalities Consumer protection regulations such as protection from fees and penalties Other 9

10 Pennsylvania CPAs continue to believe that reforming state government pensions and reducing the corporate net income tax rate would boost economic growth in the state. They believe expanding the base of items subject to sales and use tax is not likely to help improve economic growth (see Table 6). Two in five (4) Pennsylvania CPAs would support raising the Personal Income Tax (PIT) if the funds were earmarked for specific purposes. Of those who would support an increase to the PIT a large majority feel the additional funds should be used for infrastructure (8) and property tax relief (6). With the state facing an estimated budget deficit of nearly $2 billion, over half of Pennsylvania CPAs feel that the state should privatize liquor stores (6) and impose a severance tax on Marcellus Shale drillers (57%) to help balance the budget. Table 6. Which of these recommendations do you think would provide for greater economic expansion and job growth potential in Pennsylvania? Which is your second choice? Which is your third choice? Top Second Third in Top Three Reform state government pensions and benefits 37% Reduce the corporate net income tax rate 2 10% 4 Reduce state spending % Implement extraction fees on Marcellus Shale gas drilling Consolidate school district operations Increase private-public partnerships 7% 8% 2 Reduce the personal income tax 8% Reduce subsidies to state-supported colleges and universities 0% Increase the statewide sales and use tax rate Expand the base of items subject to the sales tax and use tax 10

11 New Jersey Half (5) of New Jersey CPAs believe the economic conditions in New Jersey are about the same as they were one year ago, and expect them to be about the same one year from now (5). New Jersey CPAs see stable revenue growth for their clients in their expectations for next year, which is in line with their 2014 expectations. The perception of workforce growth in 2015 was significantly higher with seventeen percent of New Jersey CPAs reporting growth in the workforce over the past year, up from one in ten in 2014 (see Table 7). Table 7. New Jersey CPAs Assessments of Their Client Business Growth Revenue this year Revenue next year Workforce this year Workforce next year NJ Substantially increased Marginally increased Not changed 38% 3 30% 30% Marginally decreased 1 20% 2 3 Substantially decreased 8% Substantially increase Marginally increase % Not changed % Marginally decrease 10% % Substantially decrease 0% Substantially increased 0% 0% 0% Marginally increased 1 10% 1 7% Not changed % Marginally decreased % 3 Substantially decreased Substantially increase 0% 0% 0% Marginally increase Not changed % 60% Marginally decrease 17% Substantially decrease 11

12 Only one in six (1) New Jersey CPAs believes the business climate in the state is excellent or good, and most (78%) believe the state s business climate hinders economic growth. Nearly nine in ten (8) New Jersey CPAs feel that the tax structure in New Jersey is worse than in most other states. New Jersey CPAs consistently rank the state s tax climate as one of the top factors contributing to the state s high unemployment rate along with companies leaving the state (see Table 8). Three-quarters (7) of CPAs in New Jersey say that they have advised a client to consider relocating due to New Jersey s estate and inheritance taxes. A large majority (8) feel New Jersey s estate and inheritance taxes affect the middle class as much as they affect the wealthy. Table 8. What factor contributes most to the state s high unemployment rate? What is the second most important factor? One or Two Companies leaving the state New Jersey tax climate 50% 6 47% Lack of pro-growth business strategy 38% 0% 0% Slowed business growth 2 0% 0% Health care costs 17% 2 1 Government regulation

13 New Jersey CPAs are in relative agreement that reducing property tax rates and reforming estate and inheritance taxes would improve economic growth in the state, but raising the marginal rate on income tax above $1 million and expanding the tax base would not (see Table 9). A majority of New Jersey CPAs (6) oppose legislation to raise the marginal tax on income above $1 million. Two in three (6) New Jersey CPAs agree the state gas tax should be raised to fund the state s Transportation Trust Fund. Table 9. Which of these recommendations do you think would provide for greater economic expansion and job growth potential in New Jersey? Which is your second choice? Which is your third choice? Top Second Third in Top Three Reduce property tax rates % Reform New Jersey s estate and inheritance taxes Cut gross income tax across the board % Reduce New Jersey s Corporate Business Tax (CBT) % 3 Raise the gas tax to fund infrastructure projects 1 10% 30% Expand the tax base 8% 7% 2 Raise the marginal rate on income above $1 million 1 13

14 State Differences on Selected Survey Items CPAs assess most state economic and business conditions differently depending on which state they practice in. New Jersey CPAs are more likely than Pennsylvania CPAs to say that economic conditions in their state are will remain stable over the next year; they are also more likely to believe their state s tax structure is worse than most other states. More Pennsylvania CPAs believe the implementation of the Affordable Care Act is affecting their business decisions. CPAs in Pennsylvania and New Jersey share similar feelings about current economic conditions in their states, with about half saying they are about the same as they were one year ago (see Table 10). Table 10. Response to Selected Survey Items by State Do you believe the economic conditions in [State] are better, worse or about the same as... n = 753 n = 843 Better than one year ago 1 1 Worse than one year ago 3 3 About the same as one year ago 4 5 Do you believe the economic conditions in [State] will be better, worse or about the same... Better one year from now 1 1 Worse one year from now 3 3 About the same one year from now 47% 5 Do you believe the business climate in [State] is excellent, good, only fair, or poor? Excellent 0% Good 2 1 Only fair 6 5 Poor 1 27% How would you describe the fiscal health of [State] state government? Is the tax structure in [State] better or worse than most other states? Is the implementation of the ACA affecting your company s business decisions? Excellent 0% 0% Good 7% Only fair 48% 4 Poor 4 50% Better 2 Worse 5 8 About the same 2 10% Yes 8 7 No 1 1 Do not now 14

15 Trends in Economic Conditions Figure 1 shows the trends in responses to six questions asked in previous surveys. Pennsylvania CPAs opinions have changed significantly for all six questions. In 2015, significantly fewer Pennsylvania CPAs believe the economic conditions in the United States and Pennsylvania are better than they were one year ago than believed so in They are significantly more likely to feel that the economic conditions in their state will be worse one year from now than they did in They are significantly less likely to rate the business climate in Pennsylvania as excellent or good, and are also less likely to feel that the current business climate encourages economic growth. Significantly more CPAs describe Pennsylvania s fiscal health as poor, and believe Pennsylvania s tax structure is worse than other states. Attitudes among New Jersey CPA s have remained stable since 2014 for all factors with the exception of the fiscal health of New Jersey. In 2015, significantly fewer New Jersey CPAs are likely to rate the state s fiscal health as excellent or good than did so in

16 Figure 1. Trends in CPAs Attitudes Toward Economic Conditions by State 16

17 Attachment A: Marginal Frequency Report 17

18 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 U.S. Economic Conditions and Fiscal Health Do you believe the economic conditions in the United States are better, worse, or about the same as they were one year ago? 2 30% Better than one year ago 1 Worse than one year ago 5 5 About the same as one year ago Do you believe the economic conditions in the United States will be better, worse, or about the same one year from now? 20% 2 Better one year from now 2 2 Worse one year from now 5 5 About the same one year from now What do you believe is the greatest hindrance to economic growth in the United States? 2 2 Government gridlock 1 1 Federal regulations 1 Federal deficit 1 Affordable Care Act 1 1 Entitlement spending 10% 1 Global economy 7% 10% U.S. tax policy Decaying infrastructure Private sector spending Spending cuts Professional skills shortage Corporate inversions How has each of the following affected U.S. economic growth during the past year? PA Federal deficit Affordable Care Act Federal regulations U.S. tax policy Entitlement spending Global economy Private sector spending Spending cuts Decaying infrastructure Professional skills shortage Government gridlock Corporate inversions Negatively affected Positively affected A great deal 30% % 20% 1 4 7% A fair amount % 30% 50% % Not much % 30% 1 2 No affect 10% 1 10% % 7% 2 Not much 1 1 A fair amount 2 A great deal 0% 0% 0% 0% Do not know 17% 1

19 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 NJ Federal deficit Affordable Care Act Federal regulations U.S. tax policy Entitlement spending Global economy Private sector sending Spending cuts Decaying infrastructure Professional skills shortage Government gridlock Corporate inversions Negatively affected Positively affected A great deal 30% 37% 3 27% 3 2 8% 8% 5 10% A fair amount % 30% % 2 30% 2 Not much No affect 1 7% 7% % Not much 1 1 A fair amount 1 7% A great deal 0% 0% 0% 0% 0% Do not know 7% State Economic Conditions, Fiscal Health, and Business Climate Do you believe the economic conditions in [Pennsylvania/New Jersey] are better, worse, or about the same as they were one year ago? 1 1 Better than one year ago 3 3 Worse than one year ago 4 5 About the same as one year ago Do you believe the economic conditions in [Pennsylvania/New Jersey] will be better, worse, or about the same one year from now? 1 1 Better one year from now 3 3 Worse one year from now 47% 5 About the same one year from now Do you believe the business climate in [Pennsylvania/New Jersey] is excellent, good, only fair, or poor? 0% Excellent 2 1 Good 6 5 Only fair 1 27% Poor Do you believe the business climate in [Pennsylvania/New Jersey] encourages economic growth, hinders economic growth, or has little effect on economic growth? 10% 8% Encourages economic growth 67% 78% Hinders economic growth 2 1 Has little effect on economic growth 2

20 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 How would you describe the fiscal health of [Pennsylvania a/new Jersey] state government: excellent, good, only fair, or poor? 0% 0% Excellent 7% Good 48% 4 Only fair 4 50% Poor Is the tax structure in [Pennsylvania/New Jersey] better orr worse than most other states? 2 Better 5 8 Worse 2 10% About the same Whichh of the following issues facing [Pennsylvania/New Jersey] is most likely to hinder future economic growth? Which is the second most likely to do so? PA Pension funding for public employees High taxes Rising health care costs Regulatory burdens A declining tax base Deficiencies in basic education A declining tax base Decaying infrastructure Professional skills shortage Ineffective tax incentive programs Other as 38% 1 10% 10% 1 as 2 20% 10% 8% 10% in Top % NJ High taxes Pension funding for public employees A declining tax base Regulatory burdens Rising health care costs Decaying infrastructure Ineffective tax incentive programs Deficiencies in basic education Professional skills shortage Other as 50% 1 7% 7% 0% 1 as 2 17% % in Top 2 67% % 17% 1 8% 3

21 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 State-Specific Items: PA Whichh of the following recommendations do you think would provide for greater economic expansion and job growth potential in Pennsylvania? Second choice? Third choice? Reform state government pensions and benefits Reduce the corporate net income tax rate Reduce state spending Implement extraction fees on Marcellus Shale gas drilling Increase private-public partnerships Consolidate school district operations Reduce the personal income tax Expand the base of items subject to the sales tax and use tax Increase the statewide sales and use tax rate Reduce subsidiess to state-supported colleges and universities as 1 as 2 as 3 37% % % 8% 1 1 0% in Top % % What state regulation has the most negative impact on Pennsylvania businesses? 48% Influence of unions in pricing and contractor selection 20% Complexity of the state tax code for businesses 1 Regulations on environmental protectionss Restrictions on which contractors can be chosen for state and municipal projects State treatment of distressedd municipalities Consumer protection regulations such ass protection from fees and penalties Other Pennsylvania faces a structural budget deficit estimated at nearly $2 billion. Which of the following should the state use to close the deficit? Secondd choice? Third choice? PA Impose a severance tax on Marcellus Shale drillers Privatize liquor stores Raise personal income tax rate Legalize the sale of marijuana Maintain the capital stock & franchise tax Raise the corporate new income tax rate Lower businesss privilege tax Other as 1 as % 1 1 7% as 3 7% 8% 7% 8% in Top 3 57% % 1 2 Would you support an increase in the PIT to 4.3 if the funds were earmarked for a specific purposes? 27% Yes 7 No Would you support an increase in the PIT to 3.7% if the funds were earmarked for a specific purposes? n=552 2 Yes 77% No 4

22 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 What purpose should the revenue from the increased PITT be used for? What is the second purpose the increased revenue be used for? n=327 Infrastructure Property tax relief Pension funding Other as 48% 3 10% 1 as in Top Whichh of the following disclosures do you think should be the next steps in improving and streamlining the budget process? as 1 Estimated future period costs of proposed programs and laws 1 Future period costs of existing programs 17% Fees paid to advisors 8% Costs for interest and fees on debt Insight into individual expenditures made by governmental unitss 10% Clearly outline assumptions of budget items 1 Sources and total costs of funding programs 1 Performance of agencies against key economic indicators 1 Other as 2 17% in as 3 Top % 10% % State-Specific Items: NJ Whichh of these recommendations do you think would provide for greater economic expansion and job growth potential in New Jersey? (Choose three) as 1 as 2 Expand the tax base Cut gross income tax across the board Reduce New Jersey s Corporate Business Tax (CBT)) Reduce property tax rates Reform New Jersey s estate and inheritance taxes Raise the marginal rate on income above $1 million Raise the gas tax to fund infrastructure projects % % as 3 7% 10% 1 1 in Top % 3 68% % With regard to operating your business in New Jersey over the next 12 months, what is your greatest concern? 2 Implications of health care reform 2 State and local taxes Regulatory requirements 1 The state s budget deficit and credit ratingg 10% Government mandates The unemployment rate Paid Sick Leavee 7% Other 5

23 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 New Jersey s unemployment rate is well above the national average. What factor contributes most to the state s high unemployment rate? What is the second most important factor? Government regulation New Jersey tax climate Companies leaving the state Health care costs Slowed business growth Lack of pro-growth business strategy as 2 30% 1 20% 1 as in top % 5 17% 2 38% Have you ever advised a client to consider relocation duee to New Jersey s state and inheritance taxes? 7 Yes 2 No Do you agree or disagree with the following statement? New Jersey s estate and inheritance taxes affect the middle class just as much as they affect the wealthy. 5 Strongly agree 30% Somewhat agree 7% Somewhat disagree 7% Strongly disagree New Jersey s Transportation Trust Fund is scheduled to run out of money for road and bridge repairs in February Do you agree or disagree with the following statement? New Jersey s gas tax should be raised to fund the state s Transportation n Trust Fund.. 3 Yes, definitely 3 Yes, probably 1 No, probably not No, not at all Do not know Do you favor or oppose legislation that raisess the marginal tax on income above $1 million from the current 8.97% to 10.7? 1 Strongly favor 2 Somewhat favor 17% Somewhat oppose 4 Strongly oppose Do not know Why do you favor raising the marginal tax rate above $1 million? n=307 5 New Jersey s wealthiest taxpayers can afford a temporary increase in their tax burden. 4 It s not fair to ask low-to-moderate income families and seniors to sacrifice while higher- income residents get a tax break 3 The tax is a necessary fix to the state s budget deficitt Some other reason *Totals may equal more than 100% because multiple answers were accepted. 6

24 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 Why do you oppose raising the marginal tax rate above $ 1 million? n=526 6 The increase will prompt wealthy residents and businesses to leave the state. 4 New Jersey need to focus on shrinking government, not imposing more taxes. 4 New Jersey residents are already the most highly taxed citizens in the nation. 4 Lower taxes on individuals and businesses are key to economic growth. Some other reason *Totals may equal more than 100% because multiple answers were accepted. Do you believe that tax incentives should be used to: 60% Support small/medium sized businesses already located in New Jersey 28% Attract large out-of-state businesses Other Do not know Whichh New Jersey tax would you lower or alter if you had to pick just one to help businesses? See Verbatim Comments Organizational/Client Growth Outlook Over the past year, has your clients revenuee substantiallyy increased, marginally increased, not changed, marginally decreased, or substantially decreased? Substantially increased 5 4 Marginally increased 27% 38% Not changed 1 1 Marginally decreasedd Substantially decreased Over the next 12 months, do you expect your clients revenue to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? Substantially increasee 50% 4 Marginally increase 3 4 Not change 10% 10% Marginally decrease 0% Substantially decrease Over the next 12 months, do you expect your clients investments in their businesses to substantially increase, marginally increase, not change, marginally decrease, or substantially increase? Substantially increased 3 3 Marginally increased 48% 5 Not changed 10% 10% Marginally decreasedd Substantially decreased 7

25 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 Over the past year, has your clients workforce substantially increased, marginally increased, not changed, marginally decreased, or substantially decreased? Substantially increased 2 1 Marginally increased 5 5 Not changed 20% 2 Marginally decreasedd Substantially decreased Over the next 12 months, do you expect your clients workforce to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? 0% 0% Substantially increasee 2 1 Marginally increase 6 6 Not change 1 17% Marginally decrease Substantially decrease Over the next 12 months, do you expect your clients salaries to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? 0% Substantially increasee 57% 4 Marginally increase 3 48% Not change 7% Marginally decrease Substantially decrease Over the next 12 months, do you expect your clients benefits to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? Substantially increasee 2 20% Marginally increase 37% 4 Not change 2 2 Marginally decrease Substantially decrease Is the Affordable Care Act affecting businesss decisions? 8 7 Yes 1 1 No Do not know 8

26 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 Whichh of the following decisionss are affected by the implementation of the Affordable Care Act? PA n= % NJ n= % 3 8% Increasing employeee cost share and co-pays of existing plans Evaluating current insurance plans Reducing employee benefits Determining a business s ability too obtain coverage through state exchanges Other *Totals may equal more than 100% because multiple answers were accepted. What percentage of your clients are making adjustments to avoid the "Cadillac tax"? PA NJ Mean % Std. Deviation The Supreme Court recently ruled to uphold same-sex marriages. Has the legalization of same sex marriages provided your firm with opportunities for growth? Yes, definitely 8% Yes, somewhat 47% 5 No, not really 4 30% No, not at all Do not know What new opportunities for growth has this ruling presented for your firm? See Verbatim Comments 9

27 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 What are the greatest obstacless you face in serving your clients? Pennsylvania Internal Obstacles Lack of skilled accounting professionals Government regulation Underfunded IRS Needs beyond accounting expertise Analytical skills shortfall Other Data security as 1 0% as % in top External Obstacles Lack of skilled accounting professionals Government regulation Underfunded IRS Needs beyond accounting expertise Analytical skills shortfall Other Data security as % 1 as in top % 27% 20% 7% 2 New Jersey Internal Obstacles Lack of skilled accounting professionals Government regulation Underfunded IRS Needs beyond accounting expertise Analytical skills shortfall Other Data security as 1 0% 28% 2 10% 1 7% as % 20% 1 in top % 1 28% External Obstacles Lack of skilled accounting professionals Government regulation Underfunded IRS Needs beyond accounting expertise Analytical skills shortfall Other Data security as as in top

28 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 Would you support additional funding to the IRS to improve services to taxpayers? 2 27% Yes, definitely 3 3 Yes, somewhat 2 2 No, not really 1 1 No, not at all Do not know Have you had a client who has been affected by identity theft? 8 8 Yes 10% 1 No Do not know Have you been able to resolve the client s identity theft issue with the IRS? n=648 n= Yes 10% 1 No 17% 1 Do not know 11

29 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 How often do you field the following types of questions from your clients? PA Frequently Occasionally Rarely Never N/A Tax planning Tax deductions Retirement plans for owners Employee benefits costs Getting a businesss loan Retirement plans for employees Succession planning/selling a business Cash management Estate planning and relocation Employee compensation Classifying individuals as employees or contractors New accounting pronouncements Developing a business loan Accounting methodologies Management estimates used in financial reporting Bankruptcy % 27% % % % 50% % % % % 17% % 27% % 0% NJ Frequently Occasionally Rarely Never N/A Tax deductions Tax planning Retirement plans for owners Estate planning and relocation Employee benefits costs Getting a businesss loan Cash management Classifying individuals as employees or contractors Retirement plans for employees Succession planning/selling a business Employee compensation Developing a business loan Accounting methodologies Management estimates used in financial reporting New accounting pronouncements Bankruptcy How many partners does your firm have? % % 28% 27% % % 48% 47% 50% 4 47% % 2 0% 0% 1 20% % % 3 38% 5 38% 4 Individual practitioner 37% 28% 2-5 partners 8% 6-10 partners 7% partners 10% 1 More than 25 partners 12

30 PICPA, NJCPA Member Survey Marginal Frequency Report October 26- November 19, 2015 PA N= 753 NJ N=843 What is your primary area of expertise? PA 57% NJ 6 Tax 1 Audit 1 1 Generalist 7% Business Advisory Forensic/Businesss Valuation Other What type of clients do you typically serve? PA 7 NJ 70% Smalll Business 1 Manufacturing Nonprofits Service Industry Personal Financial Planning International School Districts Other Open-Ended Please provide any additional comments, suggestions, or concerns you have about the economic, business, and political trends affecting your local economy. (Verbatim Responses) 13