TRENTON, New Jersey – New Jersey Government Phil Murphy is poised to sign a $56.6 billion spending plan and a tax increase on the state’s largest corporations to fund public transportation.
The state legislature sent the annual spending bill and legislation to pass new tax increases to Murphy’s desk on Friday, where he is expected to sign it Friday night.
The tax increase for companies is one of the most closely watched parts of the spending plan. The corporate transit fee would impose an additional 2.5 percent tax on companies with more than $10 million in profits and would be on top of the state’s nine percent corporate tax rate.
The revenue from the new transit fee would help fund NJ Transit, which is facing a nearly $1 billion funding gap. The new tax comes as the Metropolitan Transportation Authority struggles to find money for its budget after New York Gov. Kathy Hochul abruptly repealed a congestion pricing plan for Manhattan that Murphy strongly opposed because of its impact on New Jersey commuters.
The new transit fee would make New Jersey the state with the highest business taxes in the country. NJ Transit, one of the nation’s largest transportation networks, has been plagued by cancellations and delays during a recent heat wave. It is also raising fares for passengers by 15 percent starting next week to try to stabilize its finances.
Speaking to reporters about the corporate tax hike, Murphy said “you don’t pull that lever with pleasure.” Murphy compared the corporate tax to fund transportation to New York City’s now-paused congestion pricing plan, which would have charged commuters extra for driving into Lower Manhattan.
“You saw the drama that played out in New York City, in upstate New York, with the MTA, where they basically became dependent on third parties to solve their financial challenge in the public transportation system,” he said. “We all committed to solving our problems within our four walls, and sometimes that’s not painless.”
The new tax expires after five years and applies retroactively to profits from the beginning of 2024. New Jersey had a similar 2.5 percent surcharge for companies with profits over $1 million that expired at the end of 2023. Business groups have fought the tax increase. .
“It is in addition to the taxes levied on other major corporations by this government. It will provide little to no benefit to affected employers. It is punitive and harmful because of its retroactivity,” Michele Siekerka, president and CEO of the New Jersey Business and Industry Association, said in a statement.
As part of the budget, there is also a one percent increase in premiums for maintenance organizations and the state plans to phase in the 6.625 percent sales tax on electric vehicles starting in July 2025. Senate Environment and Energy Chairman Bob Smith was against the gradual introduction of the sales tax and voted against it along with Republicans and one other Democrat in the Senate.
The state budget includes about $7 billion in pension benefits for public workers; for the first time, a fully funded school funding formula, with about $12 billion for public education; and funding for direct property tax relief programs like ANCHOR, which gives homeowners a $1,750 rebate and renters a $700 rebate to help address the state’s high property taxes.
There is also $220 million set aside for the StayNJ program, which is expected to go into effect in 2026 and will cut property taxes for seniors in half with income limits of $500,000. The state funded the program despite requirements stating that its financing should not hinder a budget surplus of 12 percent (the surplus for the 2025 budget is about 11 percent).
“The things that are in this budget reflect the … promises we made to the people of New Jersey when we told them we were going to sit at your kitchen table and make sure that the things that are important to you are important to us,” House Speaker Craig Coughlin said at a news conference.
The state is also eliminating the back-to-school sales tax exemption, which exempted sales taxes on school and sports equipment across the state for a period before schools opened.
There were several tax and fee increases proposed by Murphy that did not make it into the final budget. A proposal to increase various gun fees was not included, and a proposal to tax warehouses based on truck trips was not a falsification of the final cut.
