New Jersey governor signs budget boosting taxes on companies making over $10 million

New Jersey Democratic Gov. Phil Murphy signed a $56.6 billion budget moments before midnight Friday, hiking taxes on high-earning corporations to help the state's transit agency while spending billions on education and other programs.

The Democrat-led Legislature, which passed the budget hours before Murphy signed, and the governor were two days ahead of their constitutionally set deadline to enact a balanced budget, avoiding a government shutdown.

“With this budget, we are going to make life more affordable for more families. We are going to create new economic opportunities for our workers and local businesses. And we are going to invest in the potential of every one of our neighbors,” Murphy said in a statement.

For taxpayers, the spending plans includes billions for K-12 education, property tax relief, public pensions and a host of other programs. For businesses making over $10 million a year, the budget carries a tax increase, hiking the top corporate rate to 11.5% for those firms, up from 9%.

Murphy, also a Democrat, proposed what he called the corporate transit fee to help the beleaguered New Jersey Transit, which could face a budget crunch in the coming year. The agency, which operates buses and trains in the state, has taken capital funds to finance its operational budget for years.

Murphy had promised to find a way to dedicate funding to the agency. It's unclear to what extent the tax increase completely accomplishes that goal. That's in part because the Legislature would have to dedicate the funding in subsequent budget years, the kind of commitment that could prove difficult to achieve if tax collections fall, for example.

The spending plan is up about 4% from the budget Murphy signed last year, a modest increase compared to past years.

The budget also calls for increasing state K-12 funding to fully implement an aid formula ratified by the state Supreme Court, raising such aid to more than $11 billion, up nearly $1 billion.

The budget also has about $2.5 billion for direct property tax relief, continuing programs introduced in 2022 and 2023 to help residents, renters and older residents. The average property tax amount in 2022, which is the most recently available information, is about $9,500, according to the state.

The budget pays for all aspects of state government, from the executive departments to public universities. The Legislature this year passed a 67% pay raise for lawmakers, their first since 2002, which goes into effect in 2026. It includes a number of expenditures — sometimes called Christmas tree line items since they’re seen as gifts for specific constituencies. They include funding for ending homelessness, helping people re-enter society from prison, fire departments, arts programs and one city’s effort to teach life skills through tennis.

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.

The new budget brings that tax back — only for companies making more than $10 million.

Republicans, in the minority in state government, and business groups decried the higher taxes, saying they fail to push economic growth and punish companies that are good corporate citizens.