Phil Murphy’s Tax Resurrection in New Jersey

The Governor revives a 2.5% corporate surtax after only two months

WSJ editorial.

"New Jersey Gov. Phil Murphy on Tuesday proclaimed the resurrection to much jubilation in Trenton. Lo, he plans to revive a corporate 2.5% surtax that lapsed a mere two months ago.

The Governor’s $55.9 billion budget for the next fiscal year includes a “new dedicated funding stream to support NJ TRANSIT.” That is, a 2.5% tax on corporate income above $10 million, which would be on top of the state’s current 9% top corporate rate. New Jersey’s new 11.5% top corporate rate would be America’s highest.

Only a year ago he boasted about letting the 2.5% corporate surtax on income over $1 million expire at the end of 2023. “Allowing this surcharge to lapse will mean more money for them to create jobs, to invest in new and more efficient equipment, to lower costs to consumers and to be able to stay here,” he crowed. Apparently not.

The Governor says his new surtax will hit only the biggest businesses. But many small and mid-sized businesses have income over $10 million. As in many states, businesses must pay New Jersey corporate tax if they generate revenue in the state no matter where they are headquartered.

By the way, New Jersey’s 4.8% unemployment rate is tied for the third highest in the country with Illinois, after California (5.1%) and Nevada (5.4%). Employment has declined by 76,015 in the last six months.

Mr. Murphy claims the surtax will raise more than $800 million annually for mass transit. Ridership remains 20% below pre-pandemic levels as more residents work remotely, and many have moved. New Jersey Transit received $4.5 billion in federal pandemic relief and will likely draw billions more from the 2021 infrastructure bill.

The problem is that New Jersey Transit’s costs have risen 30% since 2019 owing to what Mr. Murphy calls “a variety of enhancements”—namely, increased union hiring and wages. There have been no service enhancements. Welcome to New Jersey. Pay more to the government and get back less."