New Proposed Tax Hike Would Hit Every NJ Resident's Wallet

NEW JERSEY — New Jerseyans may soon have to shell out more at the cash register in order to help fund the state’s public transit system, according to a proposal floated this week by a top senate official.

Sen. Paul Sarlo (D-36), the chairman of the New Jersey Senate Budget Committee and a construction industry executive, raised the idea of increasing the sales tax to 7 percent in lieu of Gov. Phil Murphy’s proposed billion-dollar tax hike for roughly 600 businesses during a Tuesday budget hearing in Trenton.

The increase from the Garden State’s current 6.625 percent rate would be "more stable than the corporation business tax on the higher earning income companies, which could vary from year to year,” Sarlo said.

Analysts from the Office of Legislative Services separately noted that the proposed tax hike on businesses could be an unstable source of revenue for the transit system, according to NJ Spotlight.

If approved, the sales tax increase would reverse then-Gov. Chris Christie’s 2016 deal with state Democrat leaders (which also raised the gas tax for infrastructure repairs and nixed the estate tax). Read more: Christie Declares 'State Of Emergency' To Fund Road Work After Gas Tax Hike Stalls

Murphy previously expressed support for a raised sales tax, even proposing an increase back to 7 percent in 2018 during budget negotiations (the plan later proved unpopular in the Legislature).

New Jerseyans already dole out about 1.85 percent of their personal income on sales tax, according to figures from the Tax Foundation. The total state tax revenue for New Jersey in 2021, the year for which the latest data is available, is nearly $43.7 million.

Representatives from New Jersey's top business lobbying groups — who have been petitioning Murphy’s proposed tax hike since its inclusion the proposed state budget earlier this year — are unsurprisingly on board with Sarlo's plan. Michele Siekerka, president and chief executive officer of the New Jersey Business and Industry Association, floated a similar version of the sales tax hike plan last month alongside members of the New Jersey Business Coalition.

Nevertheless, several advocacy groups in New Jersey are calling for the state to extend a business tax they say could be used to bridge NJ Transit’s funding gap and keep more money in residents' pockets. That tax – the corporate business tax – expired on Dec. 31, despite last-gasp efforts to pass a law to keep it intact. Related: Controversial NJ Business Tax May Survive If New Bill Becomes Law

Murphy’s proposed “corporate transit fee” for companies with net incomes greater than $10 million would affect only about one fifth of the 3,000 companies that shelled out surcharges under the expired CBT. The fee would create a "dedicated funding stream" for the transit system "in a way that is consistent with our vision for a stronger and fairer New Jersey," Murphy said in February.

NJ Transit’s current budget woes are fueled by low pandemic-related ridership that has cost NJ Transit $2 billion in revenue to date, Patch previously reported. The end of its COVID-19 relief funding in 2025 marks additional budgetary concerns after a $119 million budget deficit identified last year.

But despite $44 million in cost reductions by offsetting "mandatory, non-discretionary cost escalations," a $106.6 million budget gap remains.

In order to ease NJ Transit’s budget woes, the board approved a 15 percent fare hike beginning July 1 and a subsequent 3 percent increase annually.

The increase would raise some commuting costs by more than $3 for a one-way ticket. For example, a one-way bus ticket from Toms River to New York City will increase from $21.25 to $24.40 under the hikes; from Princeton to New York City via train, the increase will go from $16 to $18.40.

The new rates would also impact light rail and river LINE modes of travel. You can view a table of the new fares here.

But progressive advocates say the fare hike unfairly places the financial duty on working New Jerseyans, especially given the largest portion of those paying sales taxes earn the lowest annual income.

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.”