By Tom Bracken
There has been a lot of discussion about the proposed 2.5% Corporate Transit Fee (CTF) on New Jersey’s largest employers and we, along with many of our trade association colleagues, are totally against it and would like to see it eliminated. Everyone agrees NJ Transit needs to get its fiscal house in order, however, the employer community stands firm the CTF will never be a viable solution. Thanks to NJ Transit’s increased funding sources, policymakers can instead spend the next year doing a deep dive into the agency’s true financial position and needs – and not rush through a proposal during budget season with many negative economic consequences.
Let’s begin with the facts as we see them. The governor said in his budget address that the purpose of the CTF was “solving NJ Transit’s fiscal challenges” with all dollars dedicated to the agency. The truth is NJ Transit’s fiscal challenges would not be solved by initiating the fee since the CTF, which is really a Corporation Business Tax, is historically one of the state’s most volatile taxes. The Murphy administration estimates the fee will raise $1 billion. But there’s no good way to predict how much money it would raise from year to year since it hinges on the health of the state economy and companies’ strategies regarding tax policy. This creates instability so relying on the CTF as a stable funding source is problematic.
In the meantime, the urgency of the CTF is questionable, considering that NJ Transit's deficit for the upcoming fiscal year is projected at a relatively modest $119 million, with a significant escalation forecasted in future years.
There is another item about the governor’s proposal we find curious: The proposed increase on large companies would kick in retroactively to Jan. 1, 2024 (a clawback that would be painful to impacted companies), but revenue from the fee would not start going to NJ Transit until July 2025. How can the statement about dedicating this money solely to NJ Transit be supported when for 18 months the money will go into the general treasury?
Rather than impulsively raising a business tax that’s not even a sure fix to the problem, let’s instead use the upcoming year to allow the following items to be implemented to get a more realistic view of NJ Transit’s true finances:
- The 15% fare increases implemented by NJ Transit this year will bolster revenue.
- Funding from the state’s Transportation Trust Fund, derived from the gas tax and a new fee on electric vehicle owners, will contribute to NJ Transit's financial stability.
- Realize the benefits from a consultant’s (that was hired by the Administration) analysis identifying $300 million to $600 million in savings within NJ Transit.
These all should result in a better fiscal situation at NJ Transit at the end of fiscal 2025. And, enable a better analysis as to the best long-term solution to its finances.
One thing is for certain, implementing the fee would give the state the dubious distinction of having the nation’s highest Corporation Business Tax rate for large companies, which would tarnish New Jersey's business reputation and undermine the governor’s own business attraction and retention efforts. This would jeopardize the tens of thousands of jobs already here – and dissuades large employers from bringing new ones to New Jersey.
This fee hike would come just as the Administration has been spearheading an impressive business attraction campaign. One greatly needed to project our best image as we approach the World Cup showcase opportunity in 2026. There have been trade missions to California, Israel, India, Japan, South Korea and Taiwan – where our state has rolled out the red carpet for big companies that could expand our tax base and bring jobs. Yet, the proposed fee hike jeopardizes these efforts by burdening the very companies New Jersey seeks to attract.
New Jersey needs to take steps to strengthen the state’s economy, not undermine it.
We have appealed to state legislators to oppose this damaging fee hike. We have been joined in our call by 40 local and regional chambers of commerce representing a substantial portion of New Jersey employers. We stand in agreement: This proposal hurts the state and the future economic vitality we desperately need.
This CTF proposal, as designed, would introduce reputational risk, significantly sets back our economic momentum and, if implemented, it would be a huge disappointment to C-Suite executives working in our largest companies who are tasked with making decisions regarding their companies’ future strategies. And still, not a single dollar will go to NJ Transit until July 1, 2025. Why introduce significant new risk when the proposed awardee – NJ Transit – is not rewarded?
If there is a reluctance to eliminate the CTF proposal in its entirety right now, either put this decision off until next year or consider modifying the proposal. Modifications should include the elimination of the Jan. 1, 2024 claw back, place a reasonable date for expiration of the surcharge, provide for a yearly step-down reduction in the 2.5% surcharge to reduce the reliance on outside support and encourage a self-sufficient fiscal structure for NJ Transit.
By rejecting, postponing or modifying the proposal, the state Legislature sends a powerful message that they listened to the business community, evaluated their arguments, and acted on their proposal. This would provide a much-needed boost to our increasing business friendly image. Also, it would show an appreciation for the concept of predictability that is vitally important to businesses. They need to be able to plan, as opposed to being surprised and forced to make retroactive changes, as the current proposal would dictate.
We implore the Legislature to eliminate, postpone or modify the CTF. Any of those strategies would provide a better outcome to the business community than the proposed CTF.
Tom Bracken is president & CEO of the New Jersey Chamber of Commerce