The temporary CBT surcharge helped generate millions of dollars in extra revenue for the state at a time when Governor Murphy and the Democratic led legislature have been increasing spending.
But the scheduled expiration of the tax comes just as New Jersey is facing a budget gap and other fiscal challenges.
Our budget and finance writer John Reitmeyer took a closer look at how the tax has been used and just how we got here.
He joins me now.
So, John we were inevitably always coming to this day, right?
I mean, this was always going to expire.
It shouldn't come as a surprise to anyone.
Yeah, that's absolutely true.
In fact, this tax was extended once before so originally put in place in 2018.
And we have to remember, that was a time when a lot of big corporations were getting a tax break.
When Donald Trump was president, there was a lot of momentum in Democratic states like New Jersey to sort of come back at that and maybe change tax policy at the state level, which is what New Jersey did.
It was supposed to go away at the end of 2021.
We were in the middle of COVID.
There were big concerns about the state budget at the time.
So they added a few more years, which takes us up to the end of 2023.
Now, there were some groups that Joanna Gagis reported about who are making the case for why this surcharge should remain.
You wrote about a number of fiscal challenges in front of the state.
What are they Why would this be helpful?
Yes, certainly the state is in a position, again, where it starts to need revenue.
We just came off of a period where tax collections were roaring.
The state has built up a decent budget surplus.
Things like the pension obligation are being funded.
All good things when you're looking at it from a fiscal perspective.
But this last budget that lawmakers enacted, they added on a bunch of spending at the end.
And so now we're projected to spend a lot more than we're going to take in in projected revenues and revenue.
So far, this this fiscal year have been less than they were last year.
So we're getting into some of those situations where the the numbers start to misalign, and that's a big concern.
Wasn't there talk at one point, though, very quickly to maybe lower the surcharge rate and keep it permanently?
Is there a case to be made for that?
So, again, putting it in the context of these New Jersey transit concerns, the projected shortfalls for New Jersey transit are about $1,000,000,000 in the not too distant future.
That's a big issue for lawmakers because traditionally the state budgets have been used to offset problems with New Jersey transit funding.
So that would be something that the lawmakers in the past have tried to say, let's use maybe keep a slice of this surcharge.
Remember, businesses pay.
Right now, the top end 11 and a half percent.
It would fall back down to 9%.
Still one of the highest in the nation, but not the highest in the nation.
So can you add a little bit more even as you reduce it and not get the business community too upset and bring in revenue for things like mass transit or other key investments?
That's sort of the policy tension right now for lawmakers in the governor as they go forward.
Yeah, the argument has been looking at a pro-growth mindset, the governor would say, but where do we go from here?
We've got just a couple of weeks, December 31st until it sunsets.
What happens next?
We're going to have a budget discussion coming up in February, and they're going to have to come to grips with some of these issues.
We're going to get an idea of how much the current budget is in a line in alignment with the projections.
And so a lot still has to happen in long range.
This is $1,000,000,000 in revenue that would be lost when this surcharge goes away.
So that's a big amount that they're that lawmakers can have to wrap their arms around.
John Reitmeyer for us.
John, thanks so much.
You're welcome.
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