Democratic New Jersey Gov. Phil Murphy will propose reinstating the state’s corporate business tax for some profitable companies at 11.5% during his annual budget address Tuesday, multiple outlets reported, marking the largest corporate business tax rate in the country if it’s approved.
If approved, New Jersey would have the highest corporate business tax rate in the nation.
The reinstatement of the corporate business tax is being proposed in an effort to help the financially struggling New Jersey Transit system, which currently faces a more than $100 million budget deficit, several unnamed aides told the New York Times on Tuesday.
The proposed tax would apply to companies with profits higher than $10 million a year—about 600 to 700 companies in the state—the Times reported.
All companies would pay a 9% base corporate rate and those higher earning companies would pay the additional 2.5%, the aides told the Times.
$800 million. That’s how much revenue the tax would bring to the state per year, unnamed aides told the Times.
Without the surcharge of 2.5%, New Jersey already had one of the highest corporate tax rates in the country. New Jersey, at 9%, ranked among the top four highest states in the nation behind Minnesota (9.8%), Illinois (9.5%) and Alaska (9.4%), according to the Tax Foundation.
The state’s previous surcharge expired two months ago. That expiration was an intentional choice by Murphy who said last year that allowing it to lapse would “mean more money for [businesses] to create jobs, to invest in new and more efficient equipment, to lower costs to consumers and to be able to stay here.” His Tuesday proposal reinstates the same surcharge that previously existed but is different in that it only directs the surcharge at higher-earning businesses. The additional tax revenue would help fund the state’s transit system which is desperately in need of additional funds with its nearly $107 million budget deficit. NJ Transit announced in January that it planned to raise fares by 15% beginning in July, but if Murphy’s proposal is approved fares will not need to be increased.