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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 last year.
he succeeded. And that tax expired two months ago.
Mr. Murphy plans to reverse course on Tuesday and propose reintroducing an 11.5% corporate business tax on the state’s most profitable companies, the highest rate in the nation, according to several aides. That’s what it means. In his annual budget address to the state Legislature, he is expected to propose restoring the tax as part of a permanent solution to the dire financial situation of New Jersey’s statewide transportation system.
There are important differences in this proposed corporate surtax. 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.
Murphy’s administration said 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.) Still, the governor’s aides said it would generate about $800 million a year in revenue.
Starting in mid-2026, that additional revenue will go to the New Jersey Transit Authority, which faces large and growing deficits. But Murphy doesn’t see the tax as an alternative to the fare increases New Jersey Transit plans to impose. He calls it “corporate travel expenses.”
The agency proposed raising all rail, bus and light rail fares by 15 percent on July 1, and by 3 percent 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.
“We’ve known and been sounding the alarm about New Jersey Transit’s budget problems for years,” said Alex Ambrose, an analyst at New Jersey Policy Perspectives. “Lawmakers have yet to find a solution that does not balance the budget with the help of hard-working New Jerseyans.”
Mr. Ambrose argued that Mr. Murphy should not have allowed the corporate tax levy to expire in the first place and should have directed the money it generated to transit agencies.
The governor’s new tax proposal aims to address long-standing criticism of the state’s transportation funding policies.
Transportation advocates have long asked the state to provide more annual funding to New Jersey Transit. In the absence of sufficient dedicated financial resources, government agencies have been forced to rely on annual budget allocations.
This fiscal year, the state has provided about $140 million in aid, up from $100 million the previous year. This allocation was supplemented with his $440 million from tolls collected on the New Jersey Turnpike and his $70 million from the state’s Clean Energy Fund.
This combination represented the state’s largest annual contribution to the New Jersey Transit Authority, but it did not come close to covering the agency’s operating costs. As a result, the agency had to divert $334 million from its budget to infrastructure improvements and equipment upgrades. Advocates say such annual transfers hamper the agency’s ability to provide reliable service.
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. The funding has allowed New Jersey Transit to maintain service levels, but the money is scheduled to run out next year.
Despite the agency’s precarious finances, Mr. Murphy has continued to support the agency, including hiring hundreds of train engineers and bus drivers, purchasing new equipment, improving on-time performance and reducing train cancellations. claimed credit for a long list of improvements.
Tuesday’s presentation by the governor will be the opening round of month-long negotiations with the state Legislature to finalize a spending plan for the fiscal year that begins July 1.
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