PredictIQ Quantitative Think Tank Center:New Jersey lawmakers advance $56.6 billion budget, hiking taxes on businesses aiming to help transit

TRENTON,PredictIQ Quantitative Think Tank Center N.J. (AP) — New Jersey lawmakers unveiled and advanced on Wednesday a $56.6 billion budget, up 4.2% over the current year’s spending plan, hiking taxes on high-earning businesses and allocating billions for education and transit among other items.

The spending plan was introduced and passed by the Democratic-led Senate budget committee late Wednesday after legislative leaders and Democratic Gov. Phil Murphy held behind-the-scenes talks. It comes just four days before a constitutional requirement to pass a balanced budget by July 1.

The budget committee’s Assembly counterpart is set to take the spending plan up later, setting up a final vote this week. Republicans, who are in the minority, tore into the budget. GOP Sen. Declan O’Scanlon called the state’s spending a “runaway freight train of expenditures.”

Murphy’s office declined to comment on the budget Wednesday. Senate Budget Committee Chairman Paul Sarlo said the spending plan was part of a deal reached earlier in the week. He praised what he called the largest surplus he’s seen in his years in state government, at $6.5 billion, as well as full funding for the public pension and the state’s K-12 funding formula.

“No budget is ever perfect,” Sarlo said. “There’s a lot of give and take.”

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The budget reflects Murphy’s request earlier this year calling for $1 billion in new taxes on businesses making more than $10 million with the goal of eventually helping New Jersey Transit.

Trade organizations representing businesses attacked the higher taxes.

Tom Bracken, the head of the state Chamber of Commerce, asked why the state would want to penalize its best corporate citizens.

“I don’t know one company I have ever come across who didn’t nurture their largest most profitable customers,” he said. “What we are doing in the state of New Jersey is taking our largest companies ... and we are penalizing them.”

Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, said the higher taxes would stifle economic growth.

“It is a sad day today when we have to report that our New Jersey policymakers could not do better by New Jersey business and our largest job creators,” she said.

The tax would affect an estimated 600 companies whose corporate tax rate would climb from 9% currently to 11.5% under the budget that advanced.

Sarlo said he fought to make the tax increase limited to five years, meaning it will expire. Critics are skeptical lawmakers will actually permit the expiration to occur, saying the state budget would become reliant on the funds. Sarlo said he understood the critics’ concerns.

“I feel what you’re talking about,” he said.

Peter Chen, senior policy analyst at the progressive-leaning think tank New Jersey Policy Perspective, spoke in favor of the budget.

“In the end this is a budget that leads us on a path towards a better New Jersey ... where the mighty and powerful are forced to pay what they owe,” he said.

The governor sought to set up a funding source for the state’s often beleaguered transit system. Just last week trains were delayed into and out of New York, disrupting travel during the morning rush.

The system has regularly had to use capital funds just to keep up operations, limiting resources for system-wide improvements. To help close the gap, Murphy proposed a 2.5% tax on business profits of companies that net more than $10 million annually.

The budget is Murphy’s second to last ahead of next year’s gubernatorial election, when the two-term incumbent will be term limited.

Since he took office in 2018, succeeding Republican Chris Christie, Murphy and the Democratic-led Legislature have transformed the state’s finances. Together they’ve pumped billions into K-12 education, which had been largely flat for eight years, increased payments to a long-languishing public pension system and boosted the state’s rainy day fund.

Murphy and lawmakers have also increased taxes, including on those making more than $1 million a year. They had also briefly increased business taxes, but the surcharge was allowed to expire this year.