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Governor Murphy Saddles Taxpayers With the Nation’s Highest Corporate Tax Rate

New Jersey Governor Phil Murphy’s proposed flip-flop, which reneges on his promise to allow the state’s 2.5% corporate business tax surtax to expire, has now passed both the New Jersey State Assembly and Senate and been signed by the governor. As a result, New Jersey will once again have the highest corporate income tax rate in the nation at 11.5%. The surtax will now apply to corporate taxpayers with “allocated taxable net income in excess of” $10 million a year, and it applies to tax years beginning in 2024. The legislation would allow the tax to expire after 2028 – but as surtax payers know, any expiration date is subject to extension.

New Jersey Governor Flip-Flops on Corporate Business Tax Surtax Expiration

After months of insisting that he would not allow New Jersey’s 2.5% corporate business tax surtax to be extended – and previously having allowed it to lapse for tax years beginning on January 1, 2024 – New Jersey Governor Phil Murphy is now proposing that the surtax be revived for companies earning profits that exceed $10 million a year (up from the prior threshold of $1 million). The proposal appears to apply retroactively to January 1, 2024.

This will cause New Jersey to once again have the highest corporate income tax rate in the nation at 11.5%. According to the New York Times, Governor Murphy is selling the revival of the surtax as a “corporate transit fee” because the extra revenue will be earmarked for New Jersey Transit.

The governor’s proposed flip-flop is expected to receive significant pushback from the business community. The New Jersey Chamber of Commerce, which has already called the governor’s proposal a “nightmare scenario for New Jersey,” has indicated that it will be meeting with the Murphy administration and legislative leaders to voice their opposition.