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NJ is closing in on a budget. What that means for your taxes.
By
Mike Hayes
Published Jun 25, 2024
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By
Mike Hayes
Published Jun 25, 2024
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It’s arguably the most important week of the year in New Jersey state politics, with lawmakers and Gov. Phil Murphy’s office working overtime behind closed doors to finalize the next fiscal year’s budget.
“People hear the word budget and their eyes glaze over,” said Peter Chen, senior policy analyst at New Jersey Policy Perspective. “But when people look at their school, when they look at a road, NJ Transit train, that's the state budget right there.”
NJ Transit is indeed one of the biggest concerns looming in Trenton, and multiple sources with knowledge of the negotiations confirm Murphy and lawmakers have agreed on a corporate tax surcharge to fund the ailing system. Other items being debated include a “landmark” tax relief for seniors --- but without any public plans available it's unclear how such potential tax relief will be funded.
Lawmakers have also been debating a potential sales tax hike. And while one source tells Gothamist that's now off the table, until budget bills come up for votes, there are no guarantees
Murphy administration spokesperson Mahen Gunaratna said he expects legislators to vote on a formal proposal this week — ahead of a June 30 deadline to avert a government shutdown — reflecting “98% of what the governor proposed” when he unveiled his own $56 billion budget plan in February.
Here’s a look at some of the key budget issues that could affect taxes for New Jersey individuals and businesses.
Corporate transit fee likely
Murphy’s proposed 2.5% tax surcharge would apply to the biggest corporations operating in the state. It’s effectively a new version of a tax Murphy let expire in 2023, over the objections of progressive groups who said it would shift the tax burden to residents.
Under the governor’s budget proposal, the surcharge was expected to bring in more than $800 million for NJ Transit, helping it avoid a looming fiscal cliff in the coming years. NJ Transit had been projecting a $1 billion deficit in the fiscal year beginning in summer 2025.
Two people with knowledge of the budget negotiations told Gothamist that Murphy and lawmakers have agreed to a five-year sunset of the new fee. Gothamist agreed not to name the sources because they did not have authorization to speak to media about the deal.
One of them also said an accompanying bill would specifically dedicate the funds to NJ Transit. The surcharge would sit atop of the state’s existing 9% corporate tax rate. Politico first reported on the deal between Murphy and lawmakers Friday.
This revenue would put the state on track to significantly up the funds for the transit system at a time when New Jersey commuters have endured a hoard of issues, including three commuting meltdowns last week alone.
“We've seen over the last few weeks just the effect of decades of disinvestment in New Jersey Transit. And this finally puts dedicated funding to New Jersey Transit for the first time ever in its 45-year history — and it calls on the largest, most profitable corporations in the world to pony up and pay for it, for the infrastructure that helps make them all of those enormous profits,” said Chen of the NJPP. But he noted no bill language is yet public with details guaranteeing the tax as a dedicated funding source.
Michele Siekerka, head of the New Jersey Business and Industry Association, called the 2.5% surcharge “terrible policy.”
“This will put New Jersey's corporate business tax not just the highest in the nation, but an extreme outlier. No one else is even in double digits and here we'll be at 11,” she said, referencing the existing tax and surcharge together.
Sales tax hike probably won’t happen
One of the sources told Gothamist that as part of the deal for corporate tax surcharge, lawmakers are putting aside discussions of a sales tax increase from 6.25% to 7%.
During a hearing in May, Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen), questioned whether Murphy’s administration would be open to a sales tax hike but cautioned he wasn’t making any public proposals for one. Assembly Speaker Craig Coughlin, one of the key negotiators for the budget, vowed to fight any such hike, telling NJ.com this month that he didn’t “think this is the time” to raise taxes.
Siekerka, of the business association, said that with the entire Assembly up for election next year, not raising taxes made sense to her.
“They are probably worried about people saying, ‘Well, you just put an increased sales tax. It's costing me money.’ And I think they're concerned about that, you know, about that politically,” she said.
Future of Stay NJ unclear
It’s not yet clear how or if lawmakers will be able to fund a property tax relief program Coughlin has championed for homeowners over 65 years old, which would halve their property taxes — up to a limit of $6,500 — if they’re making under $500,000 a year. The tax credit program, StayNJ, has been slated to start in 2026.
However, the bill enabling the program says it can’t go into effect unless the state is operating with a 12% budget surplus. Under Murphy’s February budget proposal, the surplus would be 11.1%.
StayNJ is also estimated to cost about $1.3 billion, as Murphy and legislators stare down declining tax revenues.
Maura Collinsgru, director of policy and advocacy for social and economic justice advocacy group New Jersey Citizen Action, said she is concerned that money in the new corporate tax surcharge could be spent on tax relief, instead of NJ Transit.
“We're falling short right now because revenue is down a bit,” she said. “The surplus is not there.”
Chen criticized StayNJ as “a program that would send the bulk of the benefits to higher-income households.”
“It's not really a responsible program to go and spend money that we don't have for a lot of people who don't need it,” he added.
Tagged
economics
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Workforce
new jersey
Politics
Mike Hayes
Mike Hayes covers equity and access to opportunity in New Jersey. He joined WNYC and Gothamist in 2023. Before that, he worked as a freelance journalist writing about policing and criminal justice. He has written for ProPublica, CNN, HuffPost, BuzzFeed News and The Appeal. He is also the author of the book, “The Secret Files: Bill De Blasio, The NYPD, and the Broken Promises of Police Reform.” In 2019, he was a finalist for the Livingston Award for Young Journalists.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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