Governor Phil Murphy of New Jersey presented a $55.9 billion budget on Tuesday, which includes almost $1 billion in additional funding for K-12 schools and suggests approximately $1 billion in new taxes on high-earning businesses to fund transit projects.
As a two-term Democrat, Murphy portrayed the budget as a fulfillment of his campaign promises, specifically highlighting his commitment to establishing a consistent revenue stream for New Jersey Transit and fully financing the state’s school funding formula, which has not been fully realized in the past.
New Corporate Transit Fee Sparks Opposition
The implementation of the Corporate Transit Fee, a newly proposed tax, is expected to encounter opposition from segments of the business community.
Furthermore, it may face scrutiny and potential fragmentation from lawmakers who seek to allocate funds towards their own favored initiatives.
Additionally, there are concerns that this tax could be used as a point of contention in the Senate primary campaign of Tammy Murphy, the first lady, which has been focusing on issues of affordability but has faced challenges in gaining momentum.
This new tax, set at 2.5 percent, will apply to approximately 600 businesses generating profits exceeding $10 million annually.
It represents a significant policy action by Governor Murphy, marking one of his final major initiatives before his term concludes in early 2026.
However, should a version of the transit tax find its way into the ultimate budget, which necessitates approval by July 1st, Governor Murphy will have successfully addressed New Jersey Transit’s imminent budget deficit and established the agency’s inaugural reliable state funding stream.
Advocates for transit have long championed the establishment of a stable funding source, a goal that the governor had appeared unenthusiastic about addressing, much to their frustration.
Murphy’s Budget: Transit Fee and Surplus
The transit fee stands out as the most significant aspect of Murphy’s proposed budget, featuring a $6.1 billion surplus, inclusive of revenue generated from the transit fee collected this year.
This surplus represents a decrease of approximately $2 billion from the budget enacted by Murphy in June and, as a percentage of the budget, falls short of the amount legally mandated for the state to allocate toward its StayNJ senior property tax relief program in 2026.
Despite concerns regarding revenue, the administration remains optimistic, citing forecasts predicting a “soft landing.”
Additionally, minor fee increases, such as the removal of the sales tax exemption for electric vehicles expected to generate about $70 million, and the introduction of a new $1 tax on trucks visiting warehouses estimated to yield approximately $10 million, have been proposed by administration officials.
The budget proposal includes $200 million allocated for StayNJ, aimed at reducing property taxes by half for individuals aged 65 and above with incomes up to $500,000, providing a maximum benefit of $6,500.
The state plans to gradually augment funding to launch the program’s inaugural year, anticipated to commence in 2026 at the earliest.
Furthermore, $2.27 billion is designated for the state’s ANCHOR property tax rebate program, benefiting both homeowners and renters.
