NJ corporate tax approved, which could give NJ Transit $800 million amid budget woes

After a contentious budget season debate over how best to aid NJ Transit through predicted future budget woes, the agency is set to receive about $800 million a year for five years from a new corporate tax passed by the legislature Friday and now headed to Gov. Phil Murphy's desk.

Murphy had first proposed the new tax in February.

While Murphy's original proposal would not have included a five-year cap on the tax — which will be 2.5% on corporations that earn more than $10 million — that was the deal ultimately negotiated with state Senate President Nicholas Scutari and Assembly Speaker Craig Coughlin in the waning days of June.

Every dollar collected during the five-year window for the tax, which includes retroactively applying it to Jan. 1 of this year, will go to NJ Transit, according to the bill that passed both chambers of the Legislature on Friday. Murphy's original proposal would not have started sending revenue to NJ Transit until fiscal year 2026, and was seen as one of the reasons a 15% fare hike starting July 1 was still necessary.

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State Assemblywoman Nancy Muñoz, R-Union, highlighted this on Wednesday before the committee vote, urging the chair to amend the bill to a fare hike until after the expiration of the tax.

"You're going to claw back $1 billion from January of 2024 until the end of this month," Muñoz said. "Why is that money not going to NJ Transit now? Help NJ Transit riders by prohibiting a fare hike for the duration of the corporate transit fee in New Jersey."

The motion was tabled, 8-5, with votes across party lines.

New source of funding for NJ Transit

Transit advocates rejoiced at the new source of funding that will offer NJ Transit some financial stability as it continues to recover ridership and farebox revenue lost due to the COVID-19 pandemic.

"This is a historic win for riders and the state of New Jersey as a whole," said Alex Ambrose, a senior policy analyst for the nonprofit research and advocacy group New Jersey Policy Perspective. "With riders about to pay higher fares, this fee makes sure that multinational companies like Amazon are also paying for the infrastructure they benefit from."

There is concern that putting an expiration date on this tax could, once again, leave NJ Transit vulnerable to another budget crisis and prevents the tax from being constitutionally dedicated.

Business advocates, however, have said the pursuit of this new tax is a betrayal after Murphy allowed a similar corporate business tax surcharge to expire , as planned, last year. That surcharge did not go to NJ Transit, but it levied a five-year, 2.5% tax on businesses earning more than $1 million a year, generating the state about $1 billion a year when it was enacted in 2018.

Transit advocates sought to keep that surcharge from expiring so it could be directed to NJ Transit, but were unsuccessful.

"We hurt economic growth by the transit tax that we just passed," Christopher Emigholz, the chief government affairs officer for the New Jersey Business & Industry Association, said during Wednesday testimony to the Senate budget and appropriations committee.

"I please respectfully ask you to vote no on this budget for the sake of our taxpayers, for the sake of our job creators, for the sake of the good of New Jersey," Emigholz said.

New revenue helps plug $1B NJ Transit budget gap

The new corporate tax revenue and annual fare increases that go into effect starting July 1 would help cover a predicted deficit the agency was facing for fiscal year 2026 of about $1 billion. The 15% fare hike goes into effect Monday and increases 3% on July 1 every year after, according to a new policy approved by NJ Transit's board in April .

The Murphy administration has also hired a consultant to find $600 million in cuts to NJ Transit's operating budget, a potentially devastating reduction of 20% that comes after agency officials made $96 million in internal cuts or "efficiencies" to balance its books for the coming fiscal year.

Also introduced at the tail end of the budget session was a bill to move forward a different Murphy plan that would enable the state Economic Development Authority to purchase $100 million worth of property from NJ Transit to potentially spark transit-oriented development and send additional revenue to the agency if EDA increases the land's value through sale or a lease arrangement.

This article originally appeared on NorthJersey.com: NJ corporate tax approved, which could give NJ Transit $800 million amid budget woes