To save NJ Transit, Gov. Murphy wants to raise taxes on NJ's wealthiest companies

Gov. Phil Murphy wants to tax the wealthiest corporations in New Jersey to create a dedicated fund for NJ Transit as it faces a nearly $1 billion fiscal cliff.

The governor announced the new tax in his annual budget address on Tuesday, which unveiled his spending priorities for the fiscal year that begins in July. The new “Corporate Transit Fee” would tax businesses that earn more than $10 million in profits.

Murphy had allowed a similar corporate income tax surcharge on businesses with $1 million in annual profits to expire this year, and repeatedly defended doing so as a necessary measure to encourage investment in New Jersey.

Like the previous surcharge, it would raise the corporate tax rate to 11.5% for affected businesses, instead of the 9% currently in effect.

“Now up to this point, our first priority has been solving NJ Transit’s operational challenges,” Murphy said in the speech. “Today, thanks to the progress we have made together, it is time to address our next priority: which is solving NJ Transit’s fiscal challenges. And with this proposal, we will do just that.”

NJ Transit, which runs commuter trains and buses throughout the state as well as to New York City, is facing a budget deficit that is projected to balloon to $1 billion in the fiscal year that starts in July 2025. The original corporate tax surcharge raised about $1 billion annually, and the new one is expected to raise about $800 million.

Transit fares are already slated to increase by 15% starting July 1, which officials previously said would plug a smaller hole in the agency’s budget for the fiscal year starting in summer 2024. Administration officials said they didn’t expect plans for the fare hike to change despite the new source of funding. NJ Transit is planning to hold public hearings on the proposed hikes before they go into effect.

Beginning with his last budget address, Murphy pledged to end the previous surcharge on wealthy companies’ taxes.

“We are top four in the country for corporate tax rate,” Murphy said on the WNYC call-in show “Ask Governor Murphy” in February. “So, we’re already a very expensive state.”

But a coalition of progressive organizations in the state fought to keep the corporate tax and use it to create a dedicated fund for NJ Transit.

“It’s hard to overstate how big of a deal this is for transit riders and the state as a whole,” said Alex Ambrose, a policy analyst with progressive think tank New Jersey Policy Perspective. “The governor’s proposal would finally provide stable, dedicated funding to an agency that’s never had it, setting a strong foundation to protect NJ Transit now and in the future.”

The governor is proposing a $55.9 billion budget with a $6.1 billion surplus. The proposal now goes to the Legislature, which has until June 30 to come to an agreement with the governor on the details.

But some transit activists in New York are not that happy with New Jersey’s governor.

"Despite increasing transit funding, by delaying congestion pricing in court, Gov. Murphy is still making commutes harder for millions of people,” said Danny Pearlstein, communications director for the Riders Alliance. “Garden State residents overwhelmingly commute into Manhattan by public transit and putting subway upgrades on hold does them a major disservice."

Murphy filed a federal lawsuit against the Federal Highway Administration last year, saying it gave a “rubber stamp” to New York’s plan to charge extra fees to drivers who enter Manhattan below 60th Street. The proposal would include a $15 fee on passenger vehicles from 5 a.m. to 9 p.m. on weekdays and from 9 a.m. to 9 p.m. on weekends.

Affordability for New Jersey residents is another key theme that the governor is highlighting in his budget proposal.

“My friends, we have crafted this year’s budget — letter by letter, line by line — to support the working families who have led New Jersey through hard times,” Murphy said. “With our budget, we will make life more affordable for more families.”

He wants to invest $3.5 billion in tax relief, increasing spending on the ANCHOR property tax rebate and a senior tax freeze program. He is also proposing setting aside $100 million as part of a three-year investment in a future tax break for seniors called “StayNJ.”

Murphy is also proposing several measures to create more affordable housing, including a program to get homeless veterans into housing and an incentive fund for towns to build Accessory Dwelling Units, small apartments that homeowners place on their properties.

“[Expanding use of accessory dwellings] will enable homeowners to convert their garage or attic into an apartment, in which a loved one, or even a local renter, can move into,” Murphy said. “This will help more New Jerseyans find a safe place to call home and save more money at the end of the month.”

Affordable housing advocates reacted to the speech with cautious optimism.

“Today’s remarks are promising for New Jersey families who are struggling to keep up with skyrocketing housing costs,” said James Williams, director of racial justice policy at the Fair Share Housing Center. “The announcement of additional funding for affordable housing is a step in the right direction, though ultimately much more needs to be done to address our state’s dire housing shortage.”

Murphy also wants to expand school funding, including an increase to the number of free preschool seats available, which he said improves education outcomes and helps families save money. His announcement that he will increase K-12 school funding received some of the biggest applause during his speech.

“Our budget will increase funding for New Jersey’s public schools by more than $900 million,” Murphy said. “And with this funding, our administration is officially delivering on a promise we have made since day one. We will be the first administration in our state’s history to fully fund New Jersey’s school funding formula.”

The governor also announced funding to help reduce worker shortages in teaching and nursing, with a series of loan forgiveness programs, student teacher stipends and tuition assistance for nurses.