Murphy budget calls for reinstatement of reduced business tax to fund New Jersey Transit

Gov. Phil Murphy proposed $55.9 billion in spending for next fiscal year in his annual budget address, approving a structural deficit and narrowing surplus, while also increasing the business tax that was eliminated just months ago as state revenue begins. He called on lawmakers to reinstate or change the . -Pandemic depression.

Murphy plans to ask lawmakers to approve a 2.5% non-marginal tax on all income earned by companies with annual net income of more than $10 million. The so-called “corporate transit fee” would replace the recently expired corporate business tax surtax, which added a 2.5% surtax on business profits over $1 million.

“We will increase this revenue without placing new burdens on small businesses. In fact, around 2,500 businesses will pay less tax than last year. And we will use this opportunity to , I would like to thank in advance the large companies that will be stepping up our efforts going forward, many of whom have partnered with our administration since its inception,” Murphy said.

Progressive groups have been calling for the levy to be reinstated for months, but business leaders had been vocal in their opposition to the tax increase even before the announcement, with state Chamber of Commerce Chief Executive Tom Bracken ( CEO) called the tax increase a “huge setback.”

The new tax is expected to raise $818 million a year, but will be retroactive to the first two quarters of 2024, so it is expected to raise just over $1 billion this year.

Only 600 businesses will pay the new tax, compared to around 3,100 businesses that paid the old levy. But unlike the old levy, the new tax is levied on a larger tax base that includes the first $1 million of business profits, so those who levy the levy will end up paying more tax.

Revenue from the new transit fees would by law go to the New Jersey Department of Transportation.The funding will help the agency address the roughly $900 million fiscal cliff it faces for the fiscal year starting in July 2026, but the statutory dedication means money. Can be repurposed At the whims of future governors and legislatures.

“As my friends in the press like to remind me, I’ve said many times that I’m going to fix New Jersey Transit even if it costs me my life. Well, I still have a pulse.” said Murphy.

Despite the additional levies, Murphy’s budget proposal would shrink New Jersey’s surplus to just under $6.1 billion, below the legal threshold required to continue the StayNJ property tax relief program. Democrats proposed StayNJ last year as an effort to cut seniors’ taxes in half.

The provisions of the StayNJ Implementing Act specifically require states to maintain a surplus equal to at least 12% of expenditures to pay for StayNJ benefits. Lawmakers can waive these legal limits through budget language or legislation.

However, in reality, the country’s surplus is likely to be even smaller. The administration is asking lawmakers to direct revenue from the new tax to the New Jersey Department of Transportation. Because corporate tax collections are delayed by months, fare revenue from the fiscal year starting July 1 will likely be used to close the fiscal cliff facing the New Jersey Transit Authority starting in July 2026. That could reduce the state’s surplus to just under $5.1 billion, but it’s unclear whether the agency will need the full amount of funding.

Under Murphy’s budget proposal, the state would spend $1.8 billion more than it receives through taxes and fees. New Jersey has had a structural deficit for the second year in a row, burning through surpluses to meet spending priorities.

The governor’s proposal would keep $7.1 billion in pension payments in full and represent the largest year-over-year increase in state school aid in more than a decade.

Murphy proposed increasing formula grants to schools by more than $900 million, bringing the state’s school funding formula to a fully funded level for the first time in state history. He asked Congress to add an additional $124 million to fund preschool expansion. This includes a $20 million tranche set aside to create 1,000 new preschool seats.

“From day one, I promised to invest in our state’s long-term success instead of making short-term changes to our public schools or skimping on pension payments. We are committed to our vision of a more just New Jersey. We are committed to building a stronger economy to support our people,” Murphy said. “Our strategy is working.”

Despite the worsening fiscal situation, New Jersey plans to maintain its largest tax relief program next fiscal year.

This includes approximately $2.3 billion in anchor programs and a planned $200 million deposit into StayNJ’s lockbox fund.

“As families struggle with rising prices at the register, we are putting more money back into their pockets than ever before. Since the introduction of the ANCHOR program, in many cases our families have We have effectively reduced property taxes to levels not seen in 10 years,” Murphy said.