- FY 2019 Budget Adopted, Potential Shutdown of State Government Averted
- New Taxes & Revenue Raisers
- New Investments in Education and NJ TRANSIT
FY 2019 Budget Adopted, Potential Shutdown of State Government Averted
Governor Phil Murphy, Senate President Steve Sweeney and Assembly Speaker Craig Coughlin reached consensus on the FY 2019 budget, averting a potential shutdown of State government shortly before the July 1st deadline. The agreement came after weeks of contentious negotiations over what taxes should be used to pay for both ongoing State operations and a series of new investments in public education and NJ Transit.
New Taxes & Revenue Raisers
In the end, the FY 2019 plan relies on a combination of a four-year increase in the Corporate Business Tax and a new permanent tax on incomes over five million dollars. The State also adopted a Combined Reporting standard for businesses.
The CBT surcharge, averaging two percent over four years will raise $425 million in first two years. The rate will be set at 2.5 percent for the first two years and 1.5 percent for the third and fourth year. The four-year surcharge applies to profits above $1 million.
Under the millionaire’s tax, filers making more than $5 million will see an increase in their income tax rate to 10.75, bringing in $280 million in annual revenue. The new Combined Reporting standard was included to ensure companies cannot place their profits in other states.
The budget package includes a measure drafted in response to the recent U.S Supreme Court decision to close a loophole that has allowed online competitors to ignore required sales taxes in states where they don't have a physical presence. The new measure requires "remote sellers" with no physical presence in the state to collect required sales taxes if they pass the thresholds of 200 transactions or $100,000 in sales.
Additionally, customers of ridesharing services will see a 50-cent surcharge on individual rides or a 25-cent increase on shared rides, and those who use AirBnB will now be required to pay the state sales tax. A surcharge on e-cigarettes and tobacco was also enacted.
The budget also contains a 90-day tax amnesty program, a key initiative of Speaker Coughlin, which must be completed by January 15, 2019.
New Investments in Education and NJ TRANSIT
Perhaps most significantly, the budget takes major steps towards fully funding public schools in New Jersey and implements the school funding formula advocated by Senate President Sweeney. The budget contains $348 million in additional school funding and it eliminates "growth caps" to provide proper funding to districts with growing enrollments. It also contains a seven-year phase-out of "adjustment aid" that compensates districts for students they no longer have.
Legislation to address concerns of some of some of the larger districts that lose funding through the loss of adjustment aid was also passed. For example, legislation was passed to allow Jersey City to institute a 1% payroll tax with the funds specifically directed toward the schools in that city.
The new budget invests $242 million for New Jersey Transit, provides $25 million in aid for community colleges, dedicates $57 million in funding for pre-k programs and makes a $3.2 billion pension payment, the largest in state history. These were all major priorities for Governor Murphy.