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Following a Senate Select Committee hearing on NJ TRANSIT on Friday, Senate President Stephen Sweeney proposed establishing a 1% tax on corporate income in New Jersey to provide a permanent source of funding for the state’s rail and bus system.

Sweeney said he is seeking to permanently set the corporate business tax rate at 10% for businesses with income over $1 million, the second highest rate in the nation. The set rate would supplant a 2.5% surcharge on the corporation business tax, which was scheduled to phase out in 2022.

Sweeney’s plan calls for the constitutional dedication of $300 million a year from the Corporation Business Tax, $125 million from the New Jersey Turnpike, and $75 million from the Clean Energy Fund to NJ TRANSIT.

It would also place an outright ban on capital-to-operating transfers from state funding sources like the gas tax and sales tax, and put a hard cap on similar transfers from federal funds.

“The absence of consistent funding for NJ TRANSIT operations has undermined its ability to provide safe and reliable service,” Sweeney said. “Dedicated funding will help prevent the diversion of resources needed to improve basic services so the agency can bring an end to the breakdowns, delays and service failures that have plagued the system far too long.

“The uncertainty leaves an agency that requires stable funding at the mercy of fiscal conditions and political circumstances that can easily fluctuate. This has been a long-standing problem that needs a long-term solution.”

NJBIA President and CEO Michele Siekerka issued a statement following Sweeney’s announcement, declaring that the association supports the concept of responsibly dedicating funds to infrastructure and the priority of making improvements at NJ TRANSIT, but not at the cost of more taxes on New Jersey’s beleaguered businesses.

“While we understand the need to prioritize improvements at NJ TRANSIT, today’s call for a permanent increase on New Jersey’s corporate business tax is very discouraging and it will greatly impact our largest employers who have already provided historic revenue to the state over the past year,” Siekerka said.

“More disappointingly, our policymakers continue to only target solutions to our challenges through more taxation and spending, rather than the comprehensive reforms we have been calling for.

“That we continue to seek to bring more tax burden to our businesses and residents during a time of dramatic revenue over-performance, and not act on proposed reforms to fix what is fiscally and structurally broken in New Jersey, is confounding. These reforms need to get done. We cannot tax ourselves out of these challenges.”

Gov. Phil Murphy’s proposed FY2021 state budget will be announced on Tuesday. It will include an as yet-to-be determined subsidy to NJ TRANSIT. Last month, Murphy declared that will be no new rate hikes for NJ TRANSIT riders.

Sweeney comprised a legislative panel to study NJ TRANSIT’s issues. Earlier in the day, Sweeney and Senate Majority Leader Loretta Weinberg challenged NJ TRANSIT CEO Kevin Corbett for not bringing the agency’s senior management team to appear for questioning, as they had requested.