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New corporate tax in New Jersey budget

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(The Center Square) – New Jersey’s Democratic Gov. Phil Murphy has signed a $56.6 billion budget that hikes taxes on high-earning corporations to help bail out the state’s cash-strapped public transit system.

The spending package, billed as the largest in state history, includes tax cuts for middle-income families and seniors, as well as increased spending on education, mental health, and the environment. It also includes new taxes and fees, including a corporate transit fee, setting a new 2.5% tax on an estimated 600 New Jersey businesses making over $10 million a year in profit.

Murphy touted a “record” $6.2 billion revenue surplus in the plan and said nearly half of the fiscal year 2025 spending – more than $27 billion – will be dedicated toward “providing direct and indirect property tax relief.”

“We are going to create new economic opportunities for our workers and local businesses,” he said in a statement. “And we are going to invest in the potential of every one of our neighbors – from our students to our senior citizens.”

The new tax replaces the state’s now-lapsed corporate business surcharge – which levies a 2.5% surcharge on net profits above $1 million – which expired at the end of December. That surcharge was implemented in 2018 in response to a 14-point federal tax cut from the Jobs and Tax Cut Act. It was meant to be temporary, but Murphy agreed to extend it several times during the COVID-19 era.

The New Jersey Business and Industry Association ripped the new transit tax as “bad policy,” saying it will give New Jersey the highest corporate tax rate in the nation, siphon away money to pay for reinvestment and innovation and impact supply chains and local businesses, among other impacts.

“While we always try to find the positives in a state budget, the unfortunate fact is this spending package is overwhelmingly bad for our job creators, for our taxpayers and our overall fiscal responsibility,” NJBIA President and CEO Michele Siekerka said in a statement. “We respectfully ask our leaders, once and for all, to seek more pro-business policies, rather than continually seeking to be an extreme national outlier in our taxes, costs and regulations.”

New Jersey Republicans blasted the final budget, saying it prioritized taxes over providing the state’s public school districts with enough money to offset rising operating costs and a drop in state funding.

“More than 150 schools are suffering from crippling aid reductions and all Trenton Democrats care about is raising taxes for low- and middle-class families,” Republican state Assemblyman Greg McGuckin said in a statement. “It is unacceptable that Democrats provided little to no time for the public, or even legislators, to digest and testify on the pile of bureaucratic garbage that was just rammed down taxpayers’ throats.”

GOP lawmakers also criticized the Murphy administration and Democrats for “misguided” priorities by “wasting hundreds of millions of taxpayer dollars on more unexplained and unjustified pork projects.”

“In a time when so many New Jerseyans are struggling to make ends meet, this budget will only exacerbate the affordability crisis we are already dealing with,” said state Sen. Owen Henry, R-Old Bridge. “From the lack of transparency and school funding cuts, to deteriorating our business climate and increasing taxes and fees, the only people that this budget helps are those sitting in their ivory towers.”

The Tax Foundation’s 2024 State Business Tax Climate Index, released in October, ranked New Jersey dead last among the 50 states in overall taxation, a spot it has held for several years.

The report’s authors said New Jersey is “hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income taxes in the country, and has one of the highest-rate individual income taxes.”

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