Lawmakers advance new business surtax aimed at funding NJ Transit

A NJ Transit train arrives at the Hamilton train station. (Photo by Dana DiFilippo | New Jersey Monitor)

NJ Transit is one step closer to a dedicated funding source after lawmakers advanced a new surtax on the state’s most profitable businesses Wednesday.

The 2.5% surtax — called the corporate transit fee — would apply to businesses with more than $10 million in profit. It would affect roughly 600 businesses, is expected to generate about $1 billion in its first year, and would sunset after five years.

Supporters say the new tax is needed as a revenue source for NJ Transit, which faces a $766.8 million budget hole next year. But it has angered the business community, which says it would make New Jersey less friendly for businesses.

“Today we sit here ready to make New Jersey stand out as an outlier in corporate business tax, not just the largest in the nation, but the largest by far,” said Michele Siekerka of the New Jersey Business and Industry Association.

Sen. Paul Sarlo, chair of the Senate Budget Committee, said he’s glad the bill sunsets the tax after five years, but he would have preferred removing a section that makes it retroactive to January 2024. 

“At the end of the day, I just thought the retroactive pay shouldn’t have been included, but it was very important to get to that total revenue to support transit,” Sarlo (D-Bergen) told reporters. 

Gov. Phil Murphy proposed the tax in the budget plan he proposed to the Legislature in February. It came after Murphy declined to extend a similar surcharge that expired last year on companies with profits that exceed $1 million. 

The bill passed in both chambers’ budget committees Wednesday before both advanced a $56.6 billion budget for the fiscal year that begins July 1. The Senate committee passed the surtax bill 9-4 and the Assembly committee passed it 8-5, with Republicans opposing the surtax measure in both chambers.

Mayors and local officials have urged the Legislature to support the surtax, which is expected to get votes in the Legislature Friday. Last week, NJ Transit was plagued with service delays and suspensions largely blamed on overhead wire issues. The agency’s riders will see fare hikes of up to 15% starting next week.

Peter Chen, senior policy analyst at progressive think tank New Jersey Policy Perspective, suggested the Legislature consider the state’s residents before the businesses that call New Jersey home.

“We need to think carefully about who it is that we should be serving here and this bill does exactly what state government should be doing — holding accountable the big corporations that are soaking up enormous amount of economic growth and saying, ‘It’s time to pay your fair share,’” said Chen. 

Business groups suggested it’s unfair to make 600 companies foot the bill for NJ Transit’s fiscal woes. Hilary Chebra of the South Jersey Chamber of Commerce noted that the southern half of the state is a transit desert, so companies would be paying more to fund something their workers can’t access. It would also impact workers in some of the poorest regions of the state, she added.

Sen. Mike Testa (R-Cape May) said the bill has good intentions but is the equivalent of “taxation without representation.”

“The people in South Jersey have paid for years of transit to not exist or have any real meaningful existence in South Jersey,” Testa said.

Chen said that’s all the more reason to dedicate a new funding source to NJ Transit. The agency’s leadership has said it would face a “death spiral” of deep service cuts if it does not get more revenue.

“Believe me, transit is not going to get any better in South Jersey if we face a transit death spiral,” Chen said.

Another bill lawmakers advanced Wednesday would green light a $100 million plan for the state’s Economic Development Authority to purchase NJ Transit property that would then be developed for residential, commercial, or mixed-use projects. NJ Transit would share in some of the proceeds.

The post Lawmakers advance new business surtax aimed at funding NJ Transit appeared first on New Jersey Monitor.