Murphy seeks new transit tax on corporations

(The Center Square) — New Jersey Gov. Phil Murphy is breaking his pledge not to raise any taxes in his second term as part of his $55.9 billion budget proposal, with a plan to tax large corporations to help bail out the state’s beleaguered public transit system.

In his annual budget address to lawmakers on Tuesday, Murphy proposed a new 2.5% corporate surcharge that would apply to businesses earning over $10 million to address NJ Transit’s budget deficit. The new hike replaces the 2.5% surtax on businesses earning over $1 million, which expired in December.

“It will provide a dedicated funding stream for NJ TRANSIT — at no additional cost to our working families,” the Democrat said in remarks. “And we will raise this revenue without placing any new burdens on small- and medium-sized businesses.”

Republicans ripped the proposal, saying it would drive out job creators and have “devastating” consequences for the state’s economy.

“Make no mistake, this so-called transit fee is the corporate business tax surcharge lite and it only exists to feed the Murphy administration’s insatiable appetite for spending taxpayers’ dollars,” Assemblyman Christopher DePhillips, R-Bergen, said in a statement. “While neighboring states are realizing the benefits of lowering their corporate taxes, New Jersey raises taxes and breaks commitments to the business community.”

The New Jersey Business and Industry Association also blasted the plans, saying it would return New Jersey to an “extreme outlier status” with the highest corporate tax rate in the nation.

“Our policymakers have created an unsustainable budget and now want to use the business community to make up for their year-after-year irresponsible budget increases,” NJBIA President and CEO Michele Siekerka said in a statement. “In fact, last year’s last-minute pork added to the budget without any transparency is larger than the proposed tax increases. This shows how spending increases are the problem, not revenue. It is not acceptable.”

The business group also noted that Murphy had recently committed to not increasing taxes on corporations, pointing to his comments at a recent press conference where he said it would be “kind of crazy to raise taxes to deliver tax relief.”

“Further, the governor’s sudden reversal on the surtax, with no forewarning, is simply bad form,” Siekerka said. “Businesses require the ability to plan to be successful. When you make promises that drive investment, and then renege on them a few weeks later, it goes well beyond creating terrible policy.”

But Murphy noted in his remarks on Tuesday that his proposed budget would also include another round of property tax relief that will benefit middle- and working-class families and seniors.

Murphy said the plan would expand “Anchor” benefits for senior homeowners and renters, among other provisions. He also pledged to provide more than $700 million in direct relief to New Jersey families through the state’s Child Tax Credit, Child and Dependent Care Tax Credit and the Earned Income Tax Credit, among other programs.

Overall, the tax-cutting proposals would put more than $3.5 billion “back into the pockets of New Jersey’s taxpayers,” Murphy said.

“So, at a time when families are grappling with higher prices at the checkout counter, we are putting more money back into their pockets than ever before,” he said.

House Speaker Craig Coughlin, a Democrat, issued a statement after Murphy’s speech saying that the discussion about increasing corporate taxes “must be had with our state’s long-term fiscal health and a further commitment to reducing property taxes in mind.”

The revived business tax proposal comes after Murphy and New Jersey lawmakers allowed the state’s corporate business surcharge — which levies a 2.5% surcharge on net profits above $1 million — to lapse at the end of December.

The corporate business surcharge was implemented in 2018 in response to a 14-point federal tax cut from the Jobs and Tax Cut Act signed by then-President Donald Trump.

The surcharge was meant to be temporary, but Murphy and lawmakers agreed to extend it several times during the COVID-19 pandemic.

Murphy, who was reelected to a second term on a pledge to cut taxes, has been among the most vocal proponents of sunsetting the tax surcharge as part of a broader agenda to shake the state’s high-tax reputation. Murphy is termed out and can’t run for another term.

For years, state business leaders have cited the need to lower taxes to prevent an exodus of businesses and workers fleeing for lower-tax states.

New Jersey lost an estimated 6,000 residents between July 2021 and July 2022, according to U.S. Census Bureau data.