Following news breaking over the weekend that Gov. Phil Murphy and legislative leaders had agreed to include a 2.5% corporate transportation tax in the FY25 state budget, many important questions remain for New Jersey’s business community.
This week, NJBIA will be looking at some of the questions that need to be answered before the budget is finalized by June 30th.
Why tax retroactively?
New Jersey’s business community was shocked when Gov. Phil Murphy announced the $1 billion in new taxes in his February budget address, after he had pledged over the past year to eliminate the temporary 2.5% corporate business tax surcharge by Dec. 31, 2023.
Instead, companies that make $10 million in profits will be subject to a new 2.5% surcharge in the form of a corporate transportation tax.
And because the governor made it retroactive to January 1, those businesses will lose their savings. But that’s not the worst part.
“What’s worst is that these companies based their 2024 financial projections and spending plans on statutory deadlines and administration promises, and then built their budgets around those promises.“We are pleased to announce that NJBIA has signed a partnership with NASA to help accelerate the development of our digital transformation,” said NJBIA President and CEO Michelle Siekelka. “Companies may have already used that money to make new investments. Now they will have to go back and recalculate their financial statements for the first two quarters of the year to adjust for this unexpected new liability.”
“Imagine what it would be like if, as an individual, you knew you could save money that you previously had to spend, and you made a plan to spend that money on something else,” she said.. “And maybe you’ve already spent that money. And now the state is telling you that you owe them six months of that money after the fact. Where is that money going to come from?”
Christopher Emigholz, NJBIA’s chief government relations officer, added that Wall Street typically doesn’t take kindly to corrections, and the ramifications could affect everyone who has investments in these companies.
The NJBIA has sought to at least soften the blow of the unfair tax by calling for an end to retroactivity, but so far the Murphy administration and congressional leadership have held firm.
“This speaks to the very nature of New Jersey not being business friendly,” Emigholz said. “Imagine a business that provides thousands of jobs to the state, that disproportionately contributes more tax revenue to the state than other states, and they’re confident that a statutory promise will be met, only to have that promise rescinded at the last minute and essentially be penalized for their troubles.”
“Governor Murphy and legislative leaders are sending that message to businesses by making this tax retroactive. There’s no room for sugar-coating. This is a punitive measure.”
There are rumors in Trenton that the cash is urgently needed and retroactive measures are necessary.
“That doesn’t make much sense given that NJ Transit’s fiscal cliff doesn’t happen until next year and they have a surplus,” Emigholz said.
“More concerning, if we truly do need cash urgently, why did we not realize this last year when there was a promise to repeal the surcharge and add another $1 billion in discretionary spending to an already bloated budget? What does piling on top of an already relentless string of taxes, with no visible spending reforms, say about our fiscal plan? If New Jersey truly does need cash urgently, it’s a clear sign that our finances are not healthy.”
Siekerka added: “NJBIA has warned of the inevitable fiscal cliff and has always been ready, and continues to be, to work with policymakers to avert it. If this is what we face in the coming years, then the time has come to loudly call for reform.”
