The deadline for New Jersey lawmakers to pass a budget is June 30, and Democrats, who control the legislature, are in the process of passing their $56.6 billion budget agreement. After an onslaught of tax hikes were bandied about during the budget process, the deal reached by lawmakers and Gov. Murphy includes his proposed corporate tax hike, misnamed as a “fee”. This will, once again, break Murphy’s debate promise that he would not raise taxes again in his second term.
The corporate tax increase was initially proposed at the beginning of February and has been included in the latest version of the state FY25 budget. Gov. Murphy calls for a 2.5% surtax placed on corporations operating in the state that make more than $10 million in revenue. This new tax would affect about 600 businesses in New Jersey and will last for the next five years. It will go into effect at the beginning of July and retroactively apply to the first six months of 2024.
Business Environment Concerns
Described the latest budget proposal as a “nightmare”. He highlighted that if the surtax were passed then New Jersey would have the highest business tax rate in the entire country. This would create a hostile environment for businesses, especially since neighboring state Pennsylvania is gradually lowering its corporate tax to 4.99%, while New York levies a 6.5%-7.25% corporate income tax.
Although this is scheduled to expire in 2029, there is no guarantee that this will occur. The previous corporate tax hike passed by the state legislature was finally sunset in 2023 but was originally set to expire back in 2021. The fact that there was such a delay in the last tax increase has left many wondering if that same thing will occur with this new surtax.
Additional Tax Increases
This corporate tax hike is not the only tax increase proposed by the latest budget. The budget also includes a stealthy one percent increase on premiums for HMOs. Additionally, it eliminates the suspension placed on the collection of motel and hotel occupancy taxes. Each of these tax hikes would continue to add to the burden that New Jersey taxpayers will endure to fuel increased government spending.
Increasing the cost of healthcare at a time of high inflation is an outrageous policy choice that New Jerseyans need to be aware of.
