News broke over the weekend that Gov. Phil Murphy and legislative leaders have agreed to include a 2.5% Corporate Transit Tax in the FY25 State Budget, raising significant concerns within New Jersey’s business community.
The New Jersey Business & Industry Association (NJBIA) has raised several critical questions that need addressing before the budget is finalized by June 30. One primary concern is the retroactive nature of the tax.
When Gov. Murphy announced a new $1 billion tax during his budget speech in February, it surprised many in the business sector. This move came despite his previous commitment to end a temporary 2.5% Corporate Business Tax surtax by Dec. 31, 2023. Companies earning $10 million in profit will now face a new 2.5% surtax under the Corporate Transit Tax, retroactive to Jan. 1, eliminating any anticipated savings.
“The worst of it is these companies based their 2024 financial projections and plans for expenditures on a statutory sunset and a commitment made by the administration and as such, put a budget in place based on those commitments,” NJBIA President and CEO Michele Siekerka said. “Companies may have already made new investments with that money. Now, they have to go back and restate their financials for the first two quarters of the year to reconcile this unintended and new liability.”
Siekerka further elaborated: “Imagine as an individual if you knew that you would be saving money you needed to spend previously and made plans to spend that money elsewhere... And maybe you already spent that money. Now the state tells you, you owe them six months’ worth of that money after the fact? Where’s it coming from?”
NJBIA Chief Government Affairs Officer Christopher Emigholz added concerns about Wall Street's reaction: "Wall Street does not usually take kindly to restatements, and the downstream impacts could affect anyone invested in those companies."
NJBIA had sought to mitigate what it views as an unfair tax by advocating against its retroactive implementation but has so far been unsuccessful in swaying the Murphy administration or legislative leadership.
“This speaks to the heart of New Jersey not being business-friendly,” Emigholz stated. He emphasized how businesses providing substantial employment and tax revenue feel penalized by last-minute changes: “That’s what Governor Murphy and our legislative leaders are telling these businesses by making this tax hit retroactive... It’s punitive.”
Rumors suggest that retroactivity might be driven by urgent cash needs, which Emigholz disputes: “That makes little sense given that NJ TRANSIT’s fiscal cliff doesn’t happen until next year and we have a surplus.”
Emigholz questioned fiscal planning practices: "If there really is a cash urgency... What does it say about our fiscal planning when we add on to already unrelenting taxes, with no apparent spending reforms?"
Siekerka added: “NJBIA has cautioned about an inevitable fiscal cliff and has always been ready to work alongside our policymakers... If this is what faces us in the next few years, calls for reforms should be shouted from rooftops now.”
