Sweeney: Hike Business Tax as Part of $500M NJ Transit Plan
Senate President Steve Sweeney has a plan to dedicate a half-billion dollars a year to NJ Transit, hopefully stabilizing its finances and ending its practice of shifting capital funds into its operating budget.
It includes a tax increase on businesses – essentially, restoring and making permanent part of a surcharge created in 2018, Gov. Phil Murphy’s first year in office, that had phased out at the start of January.
With the surcharge, the tax rate on businesses with more than $1 million in profit increased from 9% to 11.5%. It dropped to 10.5 percent on Jan. 1 – but Sweeney would restore it to 11.5%. It would then drop by 1.5% at the start of 2022, settling at 10%.
“I’m talking about going after corporations that are the benefactors of a huge windfall. You know when people say we don’t tax the wealthy, we do. We’re taxing wealthy corporations,” said Sweeney, noting the federal government’s corporate tax dropped from 35% to 21% as part of 2017 tax reforms.
“When we raised it, no one was happy, but you didn’t see the Statehouse being burned down when we did it,” Sweeney said.
Christopher Emigholz, vice president of government affairs for the New Jersey Business & Industry Association, said a tax hike could be avoided if the state enacted structural spending reforms.
“The idea of dedicating some part of CBT to transportation is a good one. The idea that we need to increase CBT is a bad one that the business community is very worried about,” Emigholz said.
“We’re already an outlier in corporate business tax rates. We’re already an outlier in income tax rates,” he said. “We're already an outlier in property taxes. We can’t afford this.”
Senate Democrats estimate that raising the corporate tax by 1% on business income over $1 million would generate $250 million to $300 million a year in revenue for the state. Sweeney wants voters to amend the state constitution to guarantee $300 million a year from the tax goes to NJ Transit.
Sweeney also wants to guarantee that NJ Transit receives $125 million a year in transfers from the Turnpike Authority, similar to what has been going on for years already. It isn’t clear if that can be done through a constitutional amendment, which could cause trouble due to language in bond covenants, or would just be done through a state law, which could be overridden each year by the state budget.
Sweeney said he’s not concerned the diversions would lead to toll increases on the authority’s New Jersey Turnpike or Garden State Parkway. He said 58% of the Turnpike’s revenue comes from out-of-state drivers.
“If you look at the Turnpike, a whole bunch of warehouses on that Turnpike now. A whole bunch of new trucks running up and down that highway,” Sweeney said. “The Turnpike’s going to be doing just fine.”
The third element of Sweeney’s proposal is to constitutionally dedicate $75 million to NJ Transit from the Clean Energy Fund, which is funded through a surcharge on utility customers’ monthly bills. Such diversions have been going on for years, though Sweeney would seek to lock it into the constitution.
“This is about societal benefit. The more people we get out of cars, the more clean, electrified buses that we get, the more modern rail cars we get, cleans the environment,” Sweeney said. “And that’s a positive.”
NJ Transit chief executive officer Kevin Corbett said it’s exciting to hear the governor and Senate president talking about robust, reliable dedicated funding for transit. Murphy announces his budget plan Tuesday and has already said it will not rely on a fare increase.
“To me as the head of an agency, where the funding comes from, how the sausage is made, which ingredients, that’s not for me to say,” Corbett said.
Corbett said he doesn’t know enough details yet about Sweeney’s plan to know how much of the funding would be considered new to the agency. Sweeney said he wants to prevent the agency from continuing to divert capital funds – $460 million this year – into its operating budget.
In the current fiscal year budget, the state directs $457.5 million into NJ Transit. Under Sweeney’s proposal, the minimum amount would be $500 million.
“Which ingredients they do, whether it’s a tax or a toll or whatever, that to me is up to them to figure what’s best. They have to deal with health care, education, everything else. I get that,” Corbett said. “But the principle that they’re talking about and the level that they’re talking about is absolute music to my ears.”