Controversial New Tax On Rich Corporations Proposed In New Jersey
NEW JERSEY — It’s going to take a big influx of cash to get NJ Transit back on the right financial track. Here’s the question: Should that money come out of the pockets of train and bus riders, or the wealthiest corporations doing business in the state?
According to many social justice advocates in the state, that’s an easy answer – and it’s one that Gov. Phil Murphy may be leaning towards.
During his 2024 budget address on Tuesday, Murphy announced that state officials are proposing the creation of a new, 2.5 percent tax on businesses raking in more than $10 million per year. It would create a “dedicated funding source” for the cash-strapped transportation agency, which is proposing a 15 percent fare hike for commuters to cover a sprawling shortfall.
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Here’s what Murphy had to say about the proposal on Tuesday (watch the video below, cued to the governor’s comments):
“Today, we are proposing a Corporate Transit Fee. It will provide a dedicated funding stream for NJ Transit — at no additional cost to our working families. With the Corporate Transit Fee, we are going to ask the biggest corporations — with net incomes greater than $10 million — to support NJ Transit future. And we will raise this revenue without placing any new burdens on small- and medium-sized businesses. In fact, nearly 2,500 companies will see their taxes decrease from last year. And let me take this opportunity to thank, in advance, the big companies which will be stepping up. Many of them have partnered with our administration since day one — and they have been essential in getting our economy back on its feet post-pandemic. But most importantly, let me also thank the hardworking commuters of New Jersey — who have always paid their fair share, and depend on our transit system every day. It is for them, first and foremost, we are fixing NJ Transit.”
Only the largest businesses doing business in New Jersey would feel the pinch, including many that don’t have headquarters located in the state, such as Amazon, Walmart and Bank of America.
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According to Murphy’s office, small and medium-sized businesses would not be impacted by the new tax. In fact, nearly 2,500 companies will see their taxes decrease from last year, officials said.
That assurance didn’t hold much water with opponents of the plan.
Assemblyman Christopher DePhillips (NJ-40) denounced what he called a “rebranded” corporate surtax, referring to a controversial extra charge on New Jersey businesses that recently expired.
“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,” the Republican lawmaker said.
DePhillips offered an ominous prediction should the proposal hit the finish line:
“These big companies have the ability to easily relocate to a more business-friendly state, which will eat into New Jersey’s bottom line, but more importantly hurt hardworking families who will either be forced out of a job or out of New Jersey. The businesses that do stay will pass that increase onto consumers who are already struggling financially.”
Meanwhile, the New Jersey Business and Industry Association accused the Murphy administration of holding successful business owners’ feet to the fire to cover up its own budget woes.
The group said Murphy is walking back previous pledges to reduce the tax burden on Garden State businesses.
“That Gov. Murphy would re-commit to a new business tax at a time of a multi-billion-dollar surplus to fund NJ Transit when there is no correlation between those impacted corps and public transportation – which he acknowledges himself – is nothing short of a punitive action against our largest job providers,” NJBIA president and CEO Michele Siekerka said.
“It is a punishment they do not deserve,” Siekerka emphasized.
“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,” Siekerka continued. “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.”
“Simultaneously, our neighbors in Pennsylvania are lowering their top CBT rate to 4.9% – and funding its transportation system without using corporate taxes,” Siekerka added.
“Go figure,” she quipped.
ADVOCATES: ‘THEY CAN AFFORD IT’
Despite the misgivings of some in the business community, a wide range of social justice groups, progressive think tanks and transportation experts are applauding the latest tax proposal.
“The governor’s budget proposal rightly asks the world’s biggest corporations to pay for the infrastructure that helps generate their record-breaking profits,” said Nicole Rodriguez, president of New Jersey Policy Perspective.
“In this current era of rising inequality, if corporations are going to swallow a lion’s share of economic growth, they shouldn’t expect to pay less in taxes and have working families make up the difference,” Rodriguez insisted.
The “For The Many NJ Coalition” also backed the latest proposal to tax wealthy corporations in a statement, pointing to other looming cost increases for commuters in New Jersey:
“If the state is going to tax low wage workers through fare, toll, and gas tax increases, we cannot let big multinational corporations and wealthy individuals get a tax cut at the same time. Wealthy corporations can afford the corporate surcharge; it would generate more than $1 billion in revenue, and businesses have already been paying it for years – their profits increased dramatically even when they paid the corporate surcharge.”
Other pundits said the new tax would be a step in the right direction, but added that New Jersey bus and train riders are still on the hook if NJ Transit decides to follow through on its proposed fare hikes.
“Today’s announcement is kind of a Catch-22,” said Zoe Baldwin, New Jersey director for the Regional Plan Association.
“NJ Transit is finally getting the dedicated, recurring source of funding it desperately needs, but riders are still left holding the bag as the state continues to advance unnecessarily high fare increases,” Baldwin said.
“Gov. Murphy’s announcement is a step in the right direction, but the state needs to do better for the tens of thousands of people who rely on transit every day,” Baldwin added.
Other support for the proposal came from:
Nedia Morsy of Make the Road New Jersey – “Working class New Jersey families of color are caught in a cycle of inflation like never before and are struggling everyday to pay rent and utilities, put food on the table, afford childcare, and now face a 15% fare hike when we take the bus to work. Governor Murphy’s move to reinstate a partial corporate business tax to fund NJTransit is an important step to make the wealthiest corporations – now reaping record profits — pay their part to keep our state afloat. Governor Murphy’s announcement today comes after months of organizing led by workers, tenants and commuters, teachers and parents, fighting to keep the vital services we rely on. We commend Governor Murphy for his action today and urge him and the legislature to fully reinstate the CBT surcharge so that we can fund and expand health care, transportation and education and stop fare and toll hikes on working families.”
Ami Kachalia, ACLU-NJ Campaign Strategist – “A necessary way of ensuring New Jersey remains a welcoming place to call home is making investments that benefit the public, from transportation to schooling. The corporate business tax is an important part of making these investments possible, and it is time for our elected leaders to make it permanent. Without it, the state is giving the largest and most profitable corporations, including multi-national companies headquartered outside of the state, a tax cut worth $1 billion per year at the expense of essential programs that provide access to opportunity for all New Jerseyans.”
Ed Potosnak, New Jersey League of Conservation Voters Executive Director – “Governor Murphy made an important first step in preserving public transit service in our state by proposing a new, dedicated funding source for NJ Transit. However, more must still be done to head off an unwise proposed fare increase that threatens to drive cars back onto the roads and increase congestion even as the agency is trying to recover from the impact of the COVID-19 pandemic. A vibrant, electrified public transit system is critical to fight climate change and keep New Jersey economically competitive.”
CORPORATE TAX SURCHARGE
The new proposal to benefit NJ Transit is a spin-off concept from a recently expired “surcharge” tax that Murphy and state lawmakers let sunset earlier this year.
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That tax – the corporate business tax (CBT) – expired on Dec. 31, despite last-gasp efforts to pass a law to keep it intact. See Related: Controversial NJ Business Tax May Survive If New Bill Becomes Law
New Jersey has a 9 percent tax on businesses, with smaller companies earning less than $1 million taxed on a sliding scale that bottoms out at 6.5 percent.
New Jersey previously charged an extra 2.5 percent “surtax” for companies that top $1 million in earnings. The surcharge rolled out in 2018, the year after Murphy was first elected. It was originally scheduled for step downs in 2020 and 2021, but it was extended by the state Legislature.
On Jan. 1, the surtax finally expired as originally planned.
However, over the past year, several advocacy groups in New Jersey have been calling for the state to extend a business tax that they say could be used to bridge NJ Transit’s funding gap – and keep more money in riders’ pockets.
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