While it appears that Gov. Phil Murphy and legislative leaders have agreed that the FY25 State Budget will include a 2.5% Corporate Transit Tax, many critical questions remain for New Jersey’s business community.
This week, NJBIA has been observing just a few of them that should be answered before the budget is finalized by June 30.
Do legislators actually believe that a $1 billion tax on business will make New Jersey more affordable and spur economic activity?
Preceding Gov. Murphy’s call for a new tax on business, he had previously allowed for a more-than-$1 billion tax on New Jersey businesses to replenish the state’s Unemployment Insurance Trust Fund.
That fund was depleted due to New Jersey having the longest and most restrictive COVID restrictions during the pandemic, leading to mass business closures and layoffs.
But instead of using federal COVID relief funds to partially or fully restore the UI fund, as most states did, Murphy decided to let business pay the full brunt of his closures.
Now this new $1 billion tax, supposedly to be dedicated to fund NJ TRANSIT, is added on top of that – at a time of increased inflation and businesses costs.
“We would like our policymakers to explain how this new tax, which is essentially a 20% tax on an already overburdened business community is sound policy that will make our state economically stronger,” said NJBIA Chief Government Affairs Officer Christopher Emigholz.
“You can start with jobs. How will this tax create new jobs, when those impacted by this tax will create their next 10, 100 or 1,000 jobs outside of New Jersey in a more business tax-friendly state where they already have a physical presence?
In a Do Better for Business video released earlier this month, NJBIA detailed how some major companies have either left the state, cut jobs here, or grew new jobs elsewhere.
The video also details how the number of Fortune 500 companies in the state has declined from 22 in 2018, to 14 this year.
“Obviously, having an 11.5% corporate tax, the highest in the nation by far, does nothing to help New Jersey’s competitiveness, especially with Pennsylvania on a path to be at 4.9%,” Emigholz added.
“But for affordability, it’s also a major strike for all New Jersey residents and consumers, because these businesses must make up the additional costs of a tax they did not expect. Workers who are employed by these companies could see less in the way of raises, or some might even lose their jobs.
“You also have to consider how the supply chain and local small businesses that rely on these large companies get their next contracts for services and products when our affected companies stagnate their New Jersey growth, or worse yet choose to relocate as their leases come due and their workforce can work remote,” Emigholz added.
“So with this tax, are we helping create jobs or chasing them away? Are we attracting capital investment? Are we actually doing anything to help NJ TRANSIT? Are we actually addressing the structural deficit? These are the questions that legislators should be asking themselves before they approve this unfair tax.”
