New Jersey Governor Phil Murphy and legislative leaders have reached a preliminary agreement with the state's most profitable companies to fund public transit. The plan involves a temporary tax increase on about 600 corporations that make at least $10 million a year in profits. These companies will pay a 2.5% tax on all earnings for five years, retroactive to January 1, 2024. The tax is expected to generate approximately $1 billion a year for NJ Transit.
In return, the state will not pursue an increase in the sales tax from 6.625% to 7%, a proposal that had been a point of contention for businesses. The sales tax was reduced in 2016 as part of a deal to finance the state’s Transportation Trust Fund.
The agreement comes as NJ Transit faces a fiscal cliff and a 15% fare hike set to take effect next month. The transit tax and a final state budget still need to be approved by the Legislature next week. The current budget expires on June 30.
While the plan has been praised by transit advocates, business groups have expressed opposition, arguing it would make New Jersey less competitive and a costlier place to do business. The New Jersey Business and Industry Association suggested dedicating any increase in revenue from the state sales tax to NJ Transit as an alternative to the corporate transit fee.