Murphy’s planned corporate transit tax to fund NJ Transit prompts praise and jeers

Gov. Phil Murphy’s proposal to fund NJ Transit with a new business tax is drawing mixed reactions, with critics jeering it as a poorly veiled rebranding of New Jersey’s recently sunsetted corporate business tax surcharge and supporters welcoming a dedicated revenue stream for the troubled transit agency.

State lawmakers ultimately will decide which parts of Murphy’s budget plan — which he unveiled Tuesday at the Statehouse in Trenton — will end up in the actual 2025 budget, which they must approve by June 30.

Some were downright angry about his proposed “corporate transit fee,” which would generate $818 million for NJ Transit and be levied on businesses with an annual net income topping $10 million. NJ Transit faces a roughly $1 billion budget shortfall next year at the same time that it’s preparing for an onslaught of World Cup visitors in 2026.

Assemblyman Christopher DePhillips (R-Bergen), who serves on his chamber’s transportation committee, said in a statement that the proposed transit fee “only exists to feed the Murphy administration’s insatiable appetite for spending taxpayers’ dollars.”

“While neighboring states are realizing the benefits of lowering their corporate taxes, New Jersey raises taxes and breaks commitments to the business community. The spending, the deficit and the constant tax increases are unsustainable,” DePhillips said.

Others were more upbeat.

Sen. Patrick Diegnan (D-Middlesex) chairs the Senate’s transportation committee and serves on its budget committee.

“Support it 100%. It’s a permanent funding source. What the governor said today is absolutely true. He took over when the system was absolutely in disrepair, and he’s put it on track, no pun intended. And now let’s deal with the funding aspect of it. So I think I think it’s a perfect solution,” Diegnan said.

Sen. Paul Sarlo, who chairs the Senate’s budget committee, supported sunsetting the corporate business tax surcharge, which was a 2.5% surtax on businesses that made at least $1 million in annual profits. Its statutory lapse on Dec. 31 cost the state $1 billion in annual revenue, but business groups celebrated its demise because it secured New Jersey’s dubious distinction as having the highest business taxes in the nation.

He called Murphy’s corporate transit tax proposal “a starting point.”

“It’s a first step. We all talked about needing a sustainable revenue source. It’s a starting point. I don’t know where we end up with it, but it’s a starting point,” Sarlo told the New Jersey Monitor after Murphy’s address. “We have to see how it’s dedicated. We got to look at all the details. At this point in time, we’ll keep an open mind, but there could be other options as well.”

Sen. John Burzichelli (D-Gloucester), a member of the Senate’s transportation and budget committees, was similarly hesitant.

“Clearly, New Jersey Transit needs a dependable stream of revenue. It’s a capital-intensive operation. It’s expensive to move people, but it’s the lifeblood of the state,” Burzichelli said. “But absent the details, I don’t know. Something has to happen. This sounds like a well-thought-out suggestion. We have to see the details.”

Business groups were blisteringly mad.

Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, pointed to recent comments Murphy made during a radio interview where he expressed little regret at sunsetting the corporate business tax.

“We are top four in the country on corporate tax rates. So we’re already a very expensive state,” Murphy said. “My heart, if you will, is not bleeding (for corporations), but we also have to be cold-blooded about our economic development strategy. We need the jobs that those big companies bring to New Jersey.’

Yet Murphy wants to institute “another new and unnecessary corporate business tax of a different name,” even as he projects a state surplus of $6.1 billion, Siekerka said.

“That Governor 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. It is a punishment they do not deserve,” she said. “Simultaneously, our neighbors in Pennsylvania are lowering their top CBT rate to 4.9% – and funding its transportation system without using corporate taxes. Go figure.”

Even those who support increasing funding to NJ Transit weren’t fully on board, questioning the need for recently announced fare and toll hikes to proceed if lawmakers approve Murphy’s proposed corporate transit tax. Members of Make the Road New Jersey rallied outside of the Statehouse ahead of Murphy’s budget address to demand the corporate surtax be restored and urge policymakers to quit relying on the working class to fix their funding woes.

“Governor Murphy also made an important first step in preserving public transit service in our state by proposing a new, dedicated funding source for NJTransit. 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,” said Ed Potosnak, executive director of the New Jersey League of Conservation Voters.

Zoe Baldwin, New Jersey director of the Regional Plan Association, called Murphy’s proposal “kind of a Catch-22.”

“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.

Still, Nicole Rodriguez, president of progressive think tank New Jersey Policy Perspective, pointed out that big corporations rely on the state’s infrastructure to generate their profits.

“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 said.