How New Jersey’s 2025 Tax Revenue Projections Might Affect the Budget Surplus
Is the Budget Surplus Safe?
Governor Murphy’s recently released FY 2025 budget proposal calls for total appropriations of $55.9 billion, up $1.5 billion (2.7%) from the original FY 2024 appropriation and up $475 million (0.9%) from the FY 2024 adjusted appropriation reported with the FY 2025 proposal. The budget continues to support the administration’s key priorities, including full funding of the state pension system, increased school aid, and substantial property tax relief provided through the ANCHOR rebate and other programs. The governor’s budget projects revenues of $54.1 billion, bolstered by several revenue enhancers. Chief among these is a new 2.5% Corporation Transit Fee on firms with incomes of over $10 million, with the funds dedicated to supporting NJ Transit. This fee largely replaces the more than $1 billion in revenue expected to be lost with the expiration of the 2.5% surtax levied on Corporation Business taxpayers with income over $1 million.
Importantly, however, the budget also includes a structural deficit, with total projected revenues of $54.1 billion falling $1.8 billion short of projected expenditures, with the gap made up by depleting the state’s surplus. Adjusted appropriations for FY 2024 are nearly $1 billion higher than in the original budget, while FY 2024 revenues are projected to be about $500 million lower. As a result, the current projection would see the budget surplus drop from $10.7 billion at the outset of FY 2024 to $6.1 billion at the end of FY 2025. If the FY 2025 budget were fully funded, maintenance of this surplus would be highly dependent on the extent to which the FY 2025 revenue projections are met. Below we examine the outlook for three key revenue sources: the sales tax, the gross income tax, and the corporation business tax.
Read more about what Will Irving found in this study.
