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Report: Murphy and leading politicians agree on tax increase
Report: Murphy and leading politicians agree on tax increase

According to a report, taxes on New Jersey’s most profitable companies will be increased to fund the state’s public transportation system.

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NEW JERSEY – Governor Phil Murphy and state leaders have agreed to a tax increase on New Jersey’s most profitable companies to fund the state’s public transit system, according to a report by POLITICO.

According to the report, the governor is not expected to seek to raise the state sales tax, despite the fact that it was suggested as an alternative solution by the chairman of the New Jersey Senate Budget Committee earlier this year. That increase would have nullified then-Governor Chris Christie’s 2016 deal with the state’s Democratic leaders (which also raised the gasoline tax for infrastructure repairs and eliminated the estate tax).

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Murphy had previously spoken out in favor of increasing the sales tax and even proposed an increase to 7 percent in 2018 during budget negotiations (the plan later proved unpopular in Parliament).

News of the deal comes less than two weeks before the state budget is due for the new fiscal year, which begins July 1 (according to POLITICO, more details on the $56 billion state budget are still being worked out). Additionally, the news comes during a hellish week for commuters, as NJ Transit trains between New Jersey and New York have been shut down twice.

The deal to support NJ Transit, touted as a “corporate transit fee” in Murphy’s budget speech this year, would require the state’s 600 companies that make at least $10 million in profits annually to pay a 2.5 percent profit tax for five years (retroactive to Jan. 1).

According to Murphy’s budget address, a corporate transfer fee would create a “dedicated source of funding” for the transit system “in a way that is consistent with our vision of a stronger and more equitable New Jersey,” Murphy said in February.

Spokespeople for Murphy did not immediately respond to Patch’s request for comment on Friday.

Senator Paul Sarlo (D-36), chairman of the New Jersey Senate Budget Committee and a construction industry executive, first floated the idea of ​​raising the sales tax to 7 percent at a budget hearing in Trenton last month, rather than the billion-dollar tax increase on the 600 businesses proposed by Governor Phil Murphy.

The increase over the Garden State’s current tax rate of 6.625 percent is “more stable than the corporate tax rate for higher-income companies, which could fluctuate from year to year,” Sarlo said at the time.

According to NJ Spotlight, analysts at the Office of Legislative Services also pointed out that the proposed tax increase on businesses could represent an unstable source of revenue for the transportation system.

New Jersey residents already spend about 1.85 percent of their personal income on sales tax, according to figures from the Tax Foundation. Total state tax revenue for New Jersey in 2021, for which the most recent data is available, is nearly $43.7 million.

Representatives of New Jersey’s major business lobbying groups — which have supported Murphy’s proposed tax increase since it was included in the state’s budget proposal earlier this year — were unsurprisingly in favor of Sarlo’s plan. Michele Siekerka, president and CEO of the New Jersey Business and Industry Association, had put forward a similar version of the sales tax increase plan last month, along with members of the New Jersey Business Coalition.

Yet several advocacy groups in New Jersey instead called for the state to extend a business tax that they said could be used to fill NJ Transit’s funding gap and put more money in citizens’ pockets. That tax – the corporate income tax – was set to expire on Dec. 31, despite last-ditch efforts to pass legislation to keep it in effect. Related: Controversial New Jersey corporate tax could remain in place if new bill goes into effect

NJ Transit’s current budget woes are exacerbated by pandemic-related low ridership, which has cost NJ Transit $2 billion in revenue so far, as Patch previously reported. The end of COVID-19 relief funding in 2025 is another source of budgetary concerns, after a $119 million budget deficit was recorded last year.

But despite $44 million in cost reductions to offset “mandatory, non-discretionary cost increases,” a budget gap of $106.6 million remains.

To alleviate NJ Transit’s budget problems, the board approved a 15 percent fare increase beginning July 1, followed by an annual 3 percent increase thereafter.

The increase would increase the cost of a one-way commuter ticket by more than $3. For example, a one-way bus ticket from Toms River to New York City would increase from $21.25 to $24.40; from Princeton to New York City by train, the increase would increase from $16 to $18.40.

The new fares would also affect the light rail and River Line. A table with the new fares can be found here.

By Seren