During his budget address in February, Gov. Phil Murphy proposed a new corporate transit fee to serve as a “dedicated funding stream for NJ Transit” but now, just weeks away from the budget deadline, the fate of the fee and what it will fund is less clear.
A new proposal presented by the Murphy administration to the Legislature this week would direct the state’s Economic Development Authority to purchase as much as $100 million in property from NJ Transit. Those purchases would be funded by revenue from a fund that would be created if the corporate transit fee is enacted in the coming fiscal year’s budget.
The corporate transit fee, as proposed earlier this year by the governor, would function similarly to the corporate business surtax that expired at the end of 2023, but with a higher income threshold. It would impose a 2.5% tax on all income earned by businesses making more than $10 million in annual net income. The revenues from that tax, Murphy has said, would help NJ Transit manage its fiscal crisis.
But where the rest of that money will go is still in play as budget negotiations in the Legislature ramp up. The fee is expected to raise more than $1 billion this fiscal year because it’s retroactive to Jan. 1, 2024 — meaning there will be six quarters included instead of four.
So after that $100 million is used by the EDA to fund purchases from NJ Transit, that would leave as much as $900 million on the table.
“The governor’s goal remains unchanged as he continues to work with his partners in the Legislature during the final weeks of budget negotiations,” said Jen Sciortino, a spokesperson for the governor’s office.
NJ Transit addresses an anticipated $119 million shortfall for fiscal year 2025, which runs from July 1, 2024, to June 30, 2025, with a fare increase. In fiscal year 2025 — from July 1, 2025 to June 30, 2026 — the shortfall is expected to skyrocket to $917.8 million — equivalent to about a third of agency’s projected budget for that year.
Legislation for the corporate transit fee hasn’t been formally introduced in the Legislature, so the content of the bill itself isn’t available. Still, more than 50 New Jersey mayors and other local officials sent a letter to legislative leaders in support of using Murphy’s proposed funding source to address problems facing NJ Transit.
“While our constituents face rising costs for transportation and basic necessities, it is unjustifiable that wealthy, multinational corporations continue to receive tax breaks that further exacerbate the financial burden on our towns and cities,” the letter said.
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Business advocates push for state sales tax hike
But business lobbyists have called for an increase in the state’s sales tax instead.
In April, Michele Siekerka, president and chief executive officer of the New Jersey Business and Industry Association and other members of the New Jersey Business Coalition — an association of industry trade groups — proposed dedicating any revenue increase from the sales tax to NJ Transit as an alternative to Murphy’s proposed fee.
State Sen. Paul Sarlo, the upper chamber’s budget chair, did ask Treasurer Elizabeth Maher Muoio and representatives from the nonpartisan Office of Legislative Services about the practicality of increasing the state’s sales tax to 7% from the current 6.625% as opposed to the governor’s proposed corporate transit fee at a hearing in May.
“If the Legislature, getting ready for a new administration down the road in two years, were looking for a stable revenue funding source for property tax relief, for education, going from 6.75 back up to 7% would be more stable than a corporate income tax on the highest companies, which could vary from year to year,” Sarlo said, noting that he was “not speaking for anybody.”
Sarlo told reporters after the meeting that he is “not supporting” increasing the sales tax but that “everything is on the table.”
When asked about the idea of increasing a tax that affects middle- and low-income residents as opposed to top-earning companies, many of which are not based in the state, Sarlo said he’s “not taking an opinion on any of them.”
“I’m just saying everything is on the table,” Sarlo said. “It could be a combination of the two. We have to look at the sustainability of both of these going forward. We have to make sure, whatever we do, we have money earmarked for [NJ] Transit.”
Katie Sobko covers the New Jersey Statehouse. Email: sobko@northjersey.com
This article originally appeared on NorthJersey.com: NJ Transit corporate transit fee proposal gets murkier
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