The latest FY25 budget news does not appear favorable for New Jersey businesses. Multiple reports on Friday, based on unnamed sources, indicated that legislative leaders have agreed with Governor Murphy to include a 2.5% Corporate Transit Tax on New Jersey’s largest employers as part of the final budget to help fund NJ TRANSIT.
The $1 billion tax will elevate New Jersey to the highest corporate business tax rate in the nation at 11.5%. Reports suggested that the new tax would be temporary for five years rather than permanent as initially proposed. However, other key mitigants were excluded from the agreement.
One such mitigant sought by NJBIA was the elimination of the retroactive nature of the tax. Without this change, impacted businesses will need to pay the higher tax dating back to January 1, 2024, despite Governor Murphy's promise to sunset a previous temporary 2.5% tax on December 31, 2023.
“We’re in a wait-and-see mode,” said NJBIA President and CEO Michele Siekerka. “Obviously, a temporary tax is better than a permanent one. But including that retroactivity of the tax going back to Jan. 1, after the Governor’s year-long promise to sunset the temporary CBT, is a major and impactful hit that borders on punitive. Especially when you consider these impacted businesses will have to restate their financials for the first half of the year for taxes they’ve already paid."
Siekerka continued: “If this is what it’s going to be, with no other meaningful concessions or structural spending reforms to make our budget more affordable, then it will be taken as a blatant disregard for the consequences and impacts that we have been sharing for months.”
NJBIA Chief Government Affairs Officer Christopher Emigholz had suggested ways Governor Murphy, Assembly Speaker Craig Coughlin, and Senate President Nick Scutari could lessen another billion-dollar increase on business:
- Make the tax temporary (and with a short-duration time bar), not permanent as Murphy initially proposed.
- Do not make the Corporate Transit Tax retroactive to January 1, 2024.
- Count both taxes as one combined 11.5% rate to allow for tax credits and offsets.
“A 20% business tax increase without meaningful mitigants crosses a big line with the business community,” Emigholz said.
During his FY25 Budget Address in February, Murphy stated he wanted his proposed Corporate Transit Tax solely dedicated to funding NJ TRANSIT. Recently, however, Coughlin suggested some funds should go towards property tax relief programs like Stay NJ or ANCHOR.
A year ago Friday, when asked if he would rule out raising taxes amid softening revenues to fund Stay NJ property tax relief for seniors, Governor Murphy confidently responded: “I think I can say definitively, yes.” However, if any portion of the surtax goes elsewhere but NJ TRANSIT, Murphy would effectively be raising taxes for delivering property tax relief.
“Even if there was a constitutional dedication for this funding solely for NJ TRANSIT only," Emigholz noted," you’re still raising taxes on business."
Siekerka added: “If this tax prevails... We can only hope we are not standing here next year discussing more broken promises.”
