Debate On Corporate Tax Reignites As NJ Transit Hikes Bus, Train Fares

NEW JERSEY — A long-running debate over a controversial business tax in New Jersey has reignited amid NJ Transit’s announcement of upcoming fare hikes.

On Wednesday, NJ Transit proposed a 15 percent rate hike for train and bus riders in its 2025 budget. If approved in April, the rate hikes will take effect on July 1. Subsequent 3 percent increases are also proposed to take effect on July 1 of each year.

The proposed rate increases are NJ Transit's first since 2015, and come as a result of low pandemic-related ridership that has cost the agency more than $2 billion in revenue, officials said. Read More: NJ Transit To Raise Fares 15% On July 1

Over the past year, several advocacy groups in New Jersey have been calling for the state to extend a business tax that they say could be used to bridge NJ Transit’s funding gap – and keep more money in riders’ pockets.

That tax – the corporate business tax (CBT) – expired on Dec. 31, despite last-gasp efforts to pass a law to keep it intact. See Related: Controversial NJ Business Tax May Survive If New Bill Becomes Law

New Jersey has a 9 percent tax on businesses, with smaller companies earning less than $1 million taxed on a sliding scale that bottoms out at 6.5 percent. It’s expected to raise a whopping $5 billion during the next fiscal year, making it one of the state’s meatiest sources of revenue.

New Jersey previously charged an extra 2.5 percent “surtax” for companies that top $1 million in earnings. The surcharge rolled out in 2018, the year after Gov. Phil Murphy was first elected. It was originally scheduled for step downs in 2020 and 2021, but it was extended by the state Legislature.

On Jan. 1, the surtax finally expired as originally planned. But according to nonprofit advocacy group New Jersey Policy Perspective (NJPP), the lost revenue could have been used to ease the pain of NJ Transit’s upcoming fare hikes.

And it’s never too late to get things back on the right track, its members add.

“Drastic fare hikes won’t solve NJ Transit’s structural financial problems, especially when the agency has never had a dedicated funding source,” NJPP policy analyst Alex Ambrose said.

“Forcing riders to foot the bill and relying on farebox revenue to bridge the financial gap is not just inequitable, it’s bad policy,” Ambrose added.

According to Ambrose, policymakers “chose corporations over New Jersey’s working families” when they “gave ultra-wealthy businesses like Amazon and Walmart a $1 billion tax cut” by refusing to extend the corporate surcharge tax.

“To prevent additional drastic fare hikes and service cuts, reinstating the corporation business tax surcharge is the smart and practical way to fund NJ Transit,” Ambrose added. “NJ Transit should not operate on the basis of revenue like a business; instead, it should be treated as a public good, and given the investments it needs to thrive.”

Eric Benson, a campaign director with For The Many NJ – a statewide coalition of dozens of public advocacy groups – also suggested raising taxes on “the wealthy and powerful” to make up for the looming shortfall.

“Fare hikes on everyday New Jerseyans does nothing to make the state more affordable and shows why we need to have fair sustainable revenue like the corporation business tax surtax,” Benson said. “While big corporations are getting $1 billion in tax cuts, New Jersey's leaders have no plan to fill budget holes and instead are throwing the costs to working families.”

“If the governor and Legislature don't get serious about raising revenues from the wealthy and powerful, it will be the working and middle-class residents of the state who end up paying the price,” Benson insisted.

Those people include Avelino Nazario, a member of Make the Road New Jersey and a Passaic resident.

“I take the bus to work five days a week, to go to doctor’s appointments and to visit my family,” Nazario said in December. “Since the pandemic, wait times have gotten longer: often 30 minutes, sometimes an hour. Two weeks ago, I missed an appointment with a specialist that took more than two months to schedule because the bus was late.”

“We’re not talking about upholstering ripped seats; we’re talking about health equity and access, getting to work on time, or losing your job,” Nazario said.

“We cannot afford any more service cuts or rate increases,” Nazario added. “Use the CBT to fully fund NJ Transit now.”

BUSINESS GROUP: ‘GOV. MURPHY MADE THE RIGHT CALL’

But according to the New Jersey Business and Industry Association (NJBIA), the “familiar calls” to power NJ Transit with corporate taxes are still barking up the wrong tree.

“Governor [Phil] Murphy made the correct call in letting the CBT temporary surtax expire,” NJBIA president and CEO Michele Siekerka said Wednesday after the news broke about NJ Transit’s upcoming fare hikes.

“The fact of the matter is there has never been a nexus between the corporate business tax surtax and NJ Transit,” Siekerka insisted.

Despite the sunset of the temporary 2.5 percent CBT surtax on Jan. 1, New Jersey still has the fourth highest CBT rate in the nation, according to the NJBIA.

“Beyond the obvious reputational damage that is done for New Jersey’s business climate nationally and internationally by having the highest CBT rate in the country, the notion of proactively wanting to keep our state as an outlier on business taxes ignores how challenging it is for our job creators to grow and expand,” Siekerka said.

“Sadly, those who seek to just heap yet another tax on business ignore the fact that some of them may not be enjoying the same level of success as they would elsewhere,” Siekerka continued. “Or that a tax increase, on top of all the high costs of running a business in New Jersey, actually can make our state unaffordable for them.”

“To just wave a magic wand with yet another tax on business, which would actually be a new tax during a time of multi-billion-dollar surplus, without looking at comprehensive NJ Transit solutions for the short-term and long-term, and seeing where we can control spending as a state, while seeking where we might be able to help our most vulnerable NJ Transit riders, is not inspired thinking,” Siekerka concluded.

• See Related: Should NJ Keep This Controversial Business Tax? Fierce Debate Rages On

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