Governor Phil Murphy plans to end a tax surcharge on New Jersey’s highest-earning businesses in an effort to make the state more affordable and competitive with neighbors.
(Bloomberg) — Governor Phil Murphy plans to end a tax surcharge on New Jersey’s highest-earning businesses in an effort to make the state more affordable and competitive with neighbors.
The governor, a Democrat in his second term, will announce the plan Tuesday during his budget introduction for the fiscal year starting July 1, according to an administration official who spoke on the condition of anonymity.
New Jersey’s tax rate for businesses with net income greater than $1 million jumped to 11.5% in 2018, in what was to be a temporary step, and was scheduled to gradually return to 9% in 2021. But the 2.5% surcharge was extended until the end of 2023 by lawmakers in 2020, as the pandemic took hold and revenue plunged amid shutdowns.
Ultimately, revenue boomed on pandemic spending and US aid. Business groups and Republicans, the legislature’s minority party, have been pushing Murphy to end the surcharge. Murphy, 65, told Bloomberg in January that he intended to do so. “A deal is a deal,” he said.
Progressives have opposed the sunset plan, calling it a $600 million tax cut for companies that don’t need it. The surcharge is paid by the top 2% of the wealthiest businesses operating in the state, including on the New Jersey earnings of global corporations such as Amazon.com Inc. and Walmart Inc. that aren’t headquartered there.
“Making millionaire corporations pay what they truly owe will be necessary to balance the state budget and maintain funding for vital public services,” said Sheila Reynertson, senior policy analyst at the Trenton-based New Jersey Policy Perspective, a nonprofit group that advocates for progressive causes.
No other US state has a corporate tax rate greater than 10%. New Jersey has the highest top levy at 11.5%, followed by Minnesota at 9.8% and Illinois at 9.5%, according to the Tax Foundation, a Washington think tank.
Neighboring Pennsylvania’s corporate tax rate fell 1 percentage point, to 8.99%, on Jan. 1. The rate will continue to decrease by 0.5 percentage points each year until it reaches 4.99% in 2031. And in New York, Governor Kathy Hochul has endorsed keeping the current business income tax rate of 7.25% for an additional three years.
The Murphy administration also is considering corporate-business tax reforms, according to the administration official. Lawmakers have been working on compromise legislation that would provide tax cuts for some of the biggest corporations operating in the state, including Johnson & Johnson, Pfizer Inc. and Anheuser-Busch.
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