As Governor Phil Murphy unveils his proposed record-breaking Fiscal Year 2025 budget for the state of New Jersey, the financial landscape stands at a critical juncture, with ripple effects that could significantly impact various sectors, including the state’s banking industry. As the backbone of the economy, the banking sector plays a pivotal role in ensuring financial stability and growth. Therefore, a careful examination of the proposed budget is imperative to gauge its potential repercussions for our membership.
At first glance, Governor Murphy’s proposed $56 billion budget seems to align with the administration’s overarching goal of rebuilding and fortifying the state’s economy post-pandemic. The proposed budget earmarks substantial funds for education, healthcare, and transportation and infrastructure, signaling a commitment to long-term economic development. However, the devil is in the details, and for the banking industry, certain aspects of the budget raise both eyebrows and concerns.
One of the major points of contention for the banking sector and larger business community is the proposed increase in corporate taxes. Governor Murphy aims to raise revenue by implementing a corporate tax hike on businesses earning over a certain threshold. The Governor has proposed a 2.5% “Corporate Transit Fee,” a fancy name for a significant tax, that would serve as a direct funding source in perpetuity for NJTransit. While this may seem like a reasonable approach to bolster the state’s coffers, such measures will simply stifle economic growth and discourage business investments during a time when our industry is under attack from rogue regulators. Further, the societal benefit of this increased tax would disproportionally supplement regional commuters and, moreover, commuters with high-paying jobs traveling into New York City. So much for the working poor?
Banks, as major corporate entities, would undoubtedly be affected by the proposed tax hike. The fear is that an increased tax burden could hinder the ability to expand operations, invest in technology, and offer competitive financial products and services. In a globally competitive market, where neighboring states like Delaware and Pennsylvania have adopted better business-friendly tax policies, such measures risk driving corporations, including financial institutions, away from the Garden State. We need to remain regionally competitive, not disadvantage ourselves with bad policy and bad politics. It was just last year that Governor Murphy committed to the sunset of the 2.5% corporate business surtax, only to re-introduce it in his proposal with a new name. Worse than the policy itself is the practice of saying one and doing the other, and the breach of faith this pattern creates.
Governor Murphy’s proposal to increase spending on affordable housing initiatives is another point of interest for the banking industry. While supporting affordable housing is a commendable goal, the industry is concerned about potential regulatory changes and increased scrutiny in lending practices. Striking a balance between promoting affordable housing and ensuring responsible lending practices is crucial to prevent unintended consequences that may adversely affect the stability of financial institutions.
While Governor Murphy’s proposed FY2025 budget demonstrates a commitment to the state’s continued recovery and future prosperity—our industry is approaching it with great caution and an acknowledgement that the budget process is long, arduous, and unpredictable. Governor Murphy proposed his FY2024 budget on February 28, 2023, and it was not approved until June 30, 2023. While our industry acknowledges the importance of investments in education, healthcare, and infrastructure we urge policymakers to consider the potential impact of tax hikes and regulatory changes. Striking a delicate balance between fiscal responsibility and supporting economic growth is mission critical to ensure a thriving banking industry that can contribute to the overall well-being of the Garden State. As always, NJBankers will partner with key stakeholders in the business community to drive good public policy and to the true benefit of our members.
