Speaking before the New Jersey Business and Industry Association today Gov. Phil Murphy doubled down on his commitment to let the state’s Corporate Business Tax Surcharge lapse as planned by the end of the year.
In 2018, Trenton enacted a 2.5 percent temporary surtax that bumped up the state’s levy, excluding partnerships and S corporations, from 9 percent to 11.5 percent for businesses with income above $1 million. In September of 2020, the CBT was extended three years.
In his NJBIA remarks Murphy described the end of the tax as an investment “in New Jersey’s capacity to outcompete other states in attracting new businesses and industries.”
“In that spirit, I am sure many of you will be pleased to hear that my position on the Corporate Business Tax (CBT) rate remains unchanged,” Murphy told the audience. “Without equivocation, I believe the C-B-T surcharge should expire at the end of this year. So as we approach the final weeks of 2023, I hope all of us can work together to achieve this shared goal.”
Murphy credited his administration’s “clear-eyed, data-informed approach” to economic development as fostering a climate that had supported the creation of 60,000 new small businesses since 2018.
New Jersey Business Magazine reported that Murphy “did note the need to be mindful of the state’s current structural deficit, which he said the sunset would exacerbate. “Unlike Washington, D.C., we can’t run structural deficits indefinitely,” Murphy said, according to NJBM.
On Nov. 17, the Department of Treasury had some sobering news reporting that “year-to-date, total revenue collections of $10.917 billion are down $452.9 million, or 4.0 percent from the same period last fiscal year.”
The dip in state revenues comes as Trenton budget makers grapple with the end of federal COVID aid that boosted state budgets during the pandemic by 36.7 percent, a record level, according to a recent report from the Pew Charitable Trusts.
Earlier this month at the League of Municipalities event, State Senate President Nick Scutari (D-Clark) floated the idea of using revenue from a reinstatement of the CBT as lifeline for the financially stressed New Jersey Transit. “That’s a funding source that would provide a billion dollars a year — and that sounds about what (NJ Transit) needs,” Scutari said. “So that might be an area where we can talk about.”
Back in August, Jersey City Mayor and gubernatorial hopeful Steve Fulop identified a renewed CBT as a way to help pay for his ambitious #FixNJplan that would shift funding from highway expansion to improving the state’s mass transit system.
“One of the things that we want to do is really fix the structural problems,” Fulop said during his policy rollout. “And, if you know that New Jersey Transit has a billion-dollar shortfall on the horizon, you need to find a billion dollars to solve for that. That’s just being realistic. And I think that’s what New Jersey residents deserve.”
Fulop explained that the CBT had been in place for years and that “the corporate community in New Jersey had already become acclimated to it” adding that “to say that it needed to (sunset) because of some hardship on the corporate community just isn’t true.”
Fulop continued. “The economic situation in New Jersey improved over the last four years. You definitely see that trend. To say that the Corporate Business Tax had some adverse impact is just being disingenuous. If you want to fix New Jersey Transit, or transportation in New Jersey, and you think that it’s important to economic development, then the reality is, the only way you’re going to do that is by finding new dollars.”
The Jersey City Mayor made the case that relying on the CBT to fund mass transit was an example of finding “the right balance” between corporate and public interests.
“It’s about choices,” Fulop observed. “And my view is that we don’t want to burden the most vulnerable people. The largest corporations, which have done very well in New Jersey, should pull their share.”
According to New Jersey Policy Perspective, a non-profit progressive think tank, the CBT “is only paid by companies that make more than $1 million in profit in New Jersey, brings in $1 billion in revenue and helps fund critical public services.”
“A backroom deal with the big business lobby doesn’t change the fact that New Jersey desperately needs this revenue to balance the budget and continue paying for schools and transit infrastructure,” wrote Peter Chen, senior policy analysts with NJPP. “As the governor noted in his remarks, the state is operating at a structural deficit, which is neither sustainable nor fiscally responsible.”
Chen continues. “Let’s not forget that the multinational corporations that pay the surcharge made record-breaking profits with this tax in place, so we have ample proof that they can afford it. The surcharge is primarily paid by companies like Amazon and Walmart, and they have no incentive to stop selling their products in New Jersey.”
Jennifer Coffey, the executive director of the Association of New Jersey Environmental Commission, told InsiderNJ that New Jersey voters voted in 2014 to mandate that six percent of the proceeds from the CBT go for environmental programs and letting the surcharge lapse would undermine open space, farmland, and historic preservation as we a community funding for hazardous waste clean-up.
“Gov. Murphy’s [budget] plan that goes into effect in January with the 2.5 percent reduction in the corporate business tax, and it has nothing to do with helping your Main Street shops, Mom and Pop coffee shop or bakery—its big businesses like Amazon and by giving Amazon a tax cut is to cut by $60 million annual environmental funding because of that constitutional dedication the voters passed— so you are giving corporations like Amazon that tax cut at the expense of communities and the environment.”
In an op-ed back in May, NJBIA Chief Government Affairs Officer Christopher Emigholz described failure the let the CBT lapse would be a “punitive act…declaring to every New Jersey citizen that you are at an extreme level of being anti-business, no ifs ands or buts about it.”
“Even with the scheduled 2.5 percent surtax reduction at the end of 2023, New Jersey’s 9 percent CBT rate would still be the fourth highest in the nation at a time when many states – most notably neighboring Pennsylvania – are lowering their corporate business taxes.,” according to NJBIA.