New Jersey’s Sales Tax Could Increase To 7% In Plan To Fund Public Transit System

A proposal by Senate Budget Committee Chairman Paul Sarlo could lead to an increase in New Jersey’s sales tax from 6.625% to 7%, aiming to fund the state’s public transit system.

The proposal comes as an alternative to Governor Phil Murphy’s proposed billion-dollar tax hike on approximately 600 of New Jersey’s largest businesses, which some fear could result in them leaving the state.

The sales tax increase, if enacted, would reverse a 2016 deal that reduced the tax rate; Murphy has previously expressed support for such a hike.

The proposed change aims to address NJ Transit’s funding gap, which has been exacerbated by low pandemic-related ridership and the end of COVID-19 relief funding in 2025. The transit system faces a $106.6 million budget gap despite cost reductions and a recently approved 15% fare hike.

While business lobbying groups support the sales tax increase, others argue that it unfairly burdens working-class residents, who already pay a significant portion of their income in sales tax. They suggest raising taxes on the wealthy and powerful to address the funding shortfall.

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