As detailed in an NJBIA infographic this week, there are numerous reasons why Gov. Phil Murphy’s proposed $1 billion Corporate Transit Tax is problematic for New Jersey job creators, workers, and consumers.
The primary concerns regarding the 2.5% Corporate Transit Tax can be summarized into three key points:
**Permanent Nature of the Tax**
When proposing the new business tax during his FY25 budget address, effectively returning New Jersey’s largest businesses to the highest corporate tax rate in the nation, Murphy indicated it would be a permanent measure to fund NJ TRANSIT. Subsequently, he stated it would be temporary—similar to the previous 2.5% Corporate Business Tax surtax.
NJBIA Chief Government Affairs Officer Christopher Emigholz commented on this: “If we’re going to have the highest corporate tax in the nation, by far, on a permanent basis, that does not bode well at all for the future of our economy, to put it plainly.”
Emigholz elaborated that having a permanent 11.5% corporation tax creates a significant deterrent for companies considering expansion or relocation to New Jersey due to its non-competitive nature compared to regional competitors.
He also mentioned that making the tax permanent instead of temporary could negatively impact publicly traded corporations’ balance sheets and stock values. There have been discussions about a temporary Corporate Transit Tax lasting up to nine years; however, Emigholz believes this would still negatively affect financial reporting.
“We just came off what was supposed to be a temporary 2.5% surtax that lasted six years,” he said. “Adding another nine years of ‘temporary’ would not be any kind of concession at all and it would still impact financial reporting.”
**Retroactive Implementation**
In February, Murphy announced that the 2.5% surtax would be retroactive to Jan. 1, 2024—one day after the prior temporary surtax expired. This means approximately 600 corporations affected by this tax will need to restate their financials for the first two quarters of 2024.
“These are companies who based their 2024 financial projections on a statutory sunset and now have a budget in place,” Emigholz explained.
“They planned for this money elsewhere in their budget and now must restate their financials to show this as a liability,” he added. The downstream impacts could affect these companies and everyone invested in them.
“And in a world where we probably overuse the terms ‘fair’ and ‘unfair,’ a retroactive tax increase just seems truly unfair,” Emigholz concluded.
**Tax Rate Composition**
Emigholz highlighted that while an 11.5% corporate tax is unfavorable for New Jersey businesses, it might be somewhat mitigated if treated as one bracket rather than separate taxes—a base rate plus an additional surtax or transit fee.
“The prior 2.5% surtax did not allow for credits or tax offsets available under the original 9% corporate tax rate,” Emigholz noted. If treated separately like before, credits and offsets wouldn’t apply to the additional 2.5%.
“New Jersey legislators have enacted various benefits encouraging business investment in areas such as research and development or low-income regions,” he said questioning why past public policy decisions should be abandoned with separate taxation approaches.
As Murphy and state legislators approach final budget negotiations before meeting constitutional deadlines, Emigholz expressed hope that stakeholders understand what is at stake with this proposed business tax increase which he described as "anti-growth" and "short-sighted."
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