New Jersey’s Democratic legislators are pushing for targeted tax breaks for a select group of dining establishments. Yet the deeper challenge lies within the state’s own tax framework.
Diners have a certain appeal that’s hard to resist: roomy red booths, coffee poured into white ceramic mugs, and the possibility of breakfast at any hour, all of which contribute to a distinctly American experience. While these eateries are scattered across the country, New Jersey is perhaps most closely tied to the diner image, proudly calling itself the “diner capital of the world.”
Yet the state’s beloved diners seem to be in difficulty. Reports suggest as many as a hundred have closed over the past decade, according to Amanda Stone, the vice president of public affairs for the New Jersey Restaurant & Hospitality Association. The closures appear to be driven by multiple forces: the lingering effects of the COVID-19 pandemic, climbing food prices driven by tariffs and inflation, and shifts in consumer tastes.
In light of these concerns, New Jersey appears to be pursuing a contentious remedy to protect the humble diner. Lawmakers from the Democratic side recently introduced the SODA POP Act, which, among other provisions, would offer up to a $25,000 tax credit for eligible diners and relieve them of collecting the state sales tax (roughly seven percent) on prepared foods.
However, qualification is not universal. The exemptions would apply only to family-owned diners that have operated without interruption for at least 25 years. Defining precisely what qualifies as a “diner” is also more complex than it might appear in statute.
Under the SODA POP Act, a diner is defined as an eating establishment where patrons sit at booths, counters, or tables and that offers “a wide variety of menu offerings, including but not limited to, hamburgers, salads, sandwiches, soups, breakfast items, entrees, pastries, pies, and beverages.” By contrast, a cafe, delicatessen, tavern, bar, sandwich shop, or other food establishment would not meet the definition.
With these constraints, roughly 500 establishments in New Jersey might qualify for this targeted relief. Yet even among diner proponents—many of whom are eager to preserve a cherished American institution—the SODA POP Act misses the mark.
For one thing, it isn’t clear why a family-owned diner that opened 23 years ago and has become a local staple should be considered less deserving of relief than one that has operated for 25 years. The bill also arbitrarily elevates the diner above other beloved New Jersey dining spots, such as a staple bagel shop or a neighborhood pizza joint.
More broadly, though, the SODA POP Act represents poor tax policy, prioritizing narrow carveouts over sweeping reforms to New Jersey’s tax code. The state clearly needs genuine tax reform.
At present, New Jersey ranks 49th out of 50 on the Tax Foundation’s 2026 State Tax Competitiveness Index. It carries the highest graduated corporate tax rate, the third-highest effective property tax rate, and some of the nation’s highest individual income taxes. In part because of these disappointing figures, WalletHub’s 2026 report placed New Jersey as the fifth-worst state for small businesses.
Put differently, New Jersey’s diners face a broader New Jersey problem as much as they confront a dining problem.
“The Soda Pop Act would be a Band-Aid over a fundamentally flawed, infected wound of a fiscal system,” explains Adam Hoffer, the director of excise tax policy at the Tax Foundation. “If New Jersey legislators truly want to assist small businesses in the state, they need to pursue foundational reforms to their tax system.”
Yet state-level reform alone does not automatically solve every challenge. Enterprises in the food service sector contend with issues unique to their model. Tariffs from the previous administration have driven up food prices by increasing the cost of tinplate steel—the metal used to manufacture cans for many foods like tomatoes, fruits and vegetables, and soups.
These higher costs inevitably press restaurants to raise menu prices (which can drive customers away) or to absorb the added expense themselves. Lawmakers who aim to help American restaurants—whether they’re a diner, a neighborhood sports bar, or a corner deli—would do well to reconsider the nation’s tariff policies.
Ironically, even as they rally to “save the diners,” New Jersey’s Democratic lawmakers have also backed measures that could threaten these establishments even more. Just last year, the legislature debated a bill to end the state’s tipped-wage credit for restaurant workers.
The tip credit allows restaurants to pay servers a lower hourly minimum wage if their tips cover the difference, a fixture of an industry historically operating on slim margins. It is currently under attack by the progressive left—also seen in nearby New York City—as part of a broader effort to apply a standard minimum wage to restaurant workers. If enacted, this policy could produce a range of adverse effects on New Jersey restaurants and could be especially harmful to diners, many of which operate around the clock and require continuous staffing.
There is no question that New Jersey’s iconic diners are struggling. Yet addressing the root causes of policy challenges, rather than dispensing targeted carveouts, represents the more effective path to aiding these establishments. Diners and their patrons deserve more than a temporary fix.
