A year ago, New Jersey Gov. Philip D. Murphy boasted about his plan to repeal the corporate business tax, casting it as a promise the state would keep as it competes for entrepreneurs.
“Allowing this surcharge to expire will free up more money so they can create jobs, invest in new, more efficient equipment, reduce costs for consumers and stay here. “This means that we will be able to do so,” Murphy, a Democrat, said. His budget blueprint from February of last year.
he succeeded. And that tax expired two months ago.
Murphy reversed course Tuesday, proposing reintroducing an 11.5% corporate business tax on the state's most profitable companies, the nation's highest rate. He offered reinstating the tax as a permanent solution to the dire financial situation of New Jersey's transportation systems across the state.
The proposal is part of a $55.9 billion spending plan that Murphy presented to a joint session of Congress in Trenton. He said the tax would provide a “dedicated funding source” for transit agencies “at no additional cost to our working families.”
He added, “Now is the time to move on to our next priority: solving New Jersey Transit's financial challenges.”
If adopted, the 11.5% tax rate would only apply to companies with annual profits of more than $10 million, up from the previous threshold of $1 million.
600 to 700 companies will be required to pay a 2.5% surcharge on top of the state's basic corporate tax rate of 9%. (About 3,000 companies paid the top rate until January, when the old tax formula expired.)
Starting in mid-2026, that additional revenue (about $800 million a year) will go to the New Jersey Transit Authority, which faces large and growing deficits.
Officials say the tax will not offset the significant fare increases that New Jersey Transit plans to impose.
The agency is proposing a 15% increase in all train, bus and light rail fares on July 1, followed by a 3% increase annually thereafter. The agency's board is scheduled to vote next week on the proposal, which would be the first fare increase since 2015, after a series of public hearings.
Transportation advocates and some Democratic Party officials have criticized the proposed fare hikes, saying they would impose an unfair additional burden on workers who take trains and buses to work.
Murphy called his proposal a “corporate transit fee” rather than a tax.
But that did little to ease the pain in the business world.
Tom Bracken, president of the New Jersey Chamber of Commerce, said the state made a “deliberate choice” to return to the nation's highest tax rate to send a message that New Jersey is “an unpredictable place to set up shop.” “I did,” he said.
“We took it out and put it right back under a different name,” said Republican Rep. Brian Bergen. “Is that crazy or what? Only New Jersey can do something like this.”
But transportation advocates welcomed it. They have been seeking a dedicated funding stream for New Jersey Transit for years and have advocated for months to reinstate the 11.5 percent corporate tax.
“This is exactly the kind of thinking we need to get New Jersey transit back on track,” said Alex Ambrose, an analyst with New Jersey Policy Perspectives, a nonpartisan research group. “And it's long past time for big companies to pay for the infrastructure that helps them generate record profits.”
The New Jersey Transit Authority is projected to have a deficit of approximately $900 million in 2026. In the absence of sufficient dedicated funding sources, the agency had to rely on allocations worked out in the annual budget.
This fiscal year, the state has provided about $140 million, up from $100 million the previous year. The allocation was supplemented with $440 million from tolls collected on the New Jersey Turnpike and $70 million from the state's Clean Energy Fund.
New Jersey Transit, which has suffered a continued decline in ridership since the emergence of the coronavirus, has survived on more than $4 billion in federal pandemic aid in recent years. That money has allowed the agency to maintain service levels, but it is scheduled to run out next year.
Despite the agency's precarious finances, Murphy has made a long list of improvements, including hiring hundreds of train engineers and bus drivers, purchasing new equipment, improving on-time performance and reducing train cancellations. claimed credit for.
Tuesday's presentation by the governor will be the opening round of month-long negotiations with the Democratic-led state Legislature to finalize a spending plan for the fiscal year that begins July 1.
The governor's $55.9 billion plan is 50 percent larger than the first budget he introduced six years ago. This reflects an increase of about 1 percent over the state's current budget of $55.4 billion and a $2 billion reduction in the state's surplus fund, a rainy day fund for unexpected expenses.
The proposal includes $11.6 billion for public schools. This is a $900 million increase over current allocations to schools and for the first time fully meets the state's obligations under the 2018 School Funding Formula.
“We are proving that being fiscally responsible gives us more leeway to be morally responsible,” Murphy said.
Regina Egea, president of the Garden State Initiative, a right-wing think tank focused on economic growth, said there is little in the spending plan that she believes is fiscally responsible.
Egea said Murphy missed an opportunity to put New Jersey on a more sustainable path, noting that tax revenues are declining and federal aid related to the pandemic is drying up.
“I had an opportunity to tighten my belt,” she said. “But this is not something that comes down to Earth.”
