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A new administration, a new budget agreement, same old tax and spend approach.  

New Jersey Democratic Governor Mikie Sherrill has reached an agreement with legislative leaders on the state budget. The plan will weigh in at a hefty $60.7 billion, though details were short at the time of announcement. In March, Governor Mikie Sherrill released her Fiscal Year 2027 budget.  

With recent federal action straining budgets, state lawmakers have been working to craft a budget that addresses structural deficits. Significant proposals that are still on the table would raise taxes.  

When asked about raising taxes in the first budget, appealing to voters’ concerns about affordability, Governor Sherrill stated in 2025, “I don’t intend to — what I’m looking to do right now is drive down costs for New Jerseyans.” Unfortunately, rather than contain spending, Governor Sherrill may break her promise not to raise tax burdens.  

Employer Healthcare Assistance Contributions 

One example of this comes from the proposed “Employer Healthcare Assistance Contributions,” which would fine companies with at least 50 employees on NJ FamilyCare, New Jersey’s Medicaid program. This is projected to raise $145 million. 

Unfortunately, this comes with very concerning consequences. Having this fine could encourage employers to avoid hiring lower-income and young individuals, viewing them as an expense. Furthermore, this effective tax would only overcomplicate the current healthcare system, given that the Affordable Care Act already has a large-employer mandate, creating a more difficult environment that would discourage workers and businesses.  

This employer healthcare assistance contributions plan also makes no mention of how to handle non-traditional workers, including part-time or seasonal workers, or those who refuse healthcare benefits. This opaque policy only adds to the confusion for businesses, leading firms to seek friendlier business environments, as ExxonMobil and Samsung have done.  

Net Operating Loss Caps and Alternative Business Tax Deduction phase out 

Another stealthy tax in the budget involves changes to the corporate business tax. This includes temporarily capping deductions at $1 million per year for three years on net operating losses (NOL) and phasing out alternative business tax deductions over $500,000. In her budget address, Governor Sherrill framed these changes as closing loopholes while protecting the diner and car repair shop.  

Having these caps on NOLs and deductions only further worsens the business environment. NOLs can provide greater long-term business stability, leading to a better business environment and allowing them to retain workers for longer. Alternative business tax deductions, which apply only to pass-through entities (S Corporations, Partnerships, Limited Liability Corporations, etc.), primarily benefit small businesses and could cost New Jersey taxpayers an average of $12,000 while further desynchronizing the state’s system from its regional counterparts.  

Pork Spending 

Even with these sneaky tax increases, New Jersey’s fiscal situation is far from rosy. Spending has increased by $1.9 billion, including a 450% increase in so-called “Christmas-tree items” (mainly funding private and non-profit organizations) since 2024, while a $1.5 billion structural deficit persists. Even though Governor Sherrill claims there is a reduction in spending, the increase in spending does not reflect this claim. 

While Governor Sherrill has framed herself as the fiscal hawk who seeks to cut pork spending, she is allowing this to happen on her watch. As Senate Republicans have pointed out, cutting this special-interest funding can save New Jersey nearly $1 billion, while using that money to build short-term cash reserves and interest-bearing notes can ensure future fiscal stability.   

Stay NJ 

After recent negotiations between Governor Sherrill, Speaker of the Assembly Craig Coughlin, and Senate President Nicholas Scutari, some reforms have been made to Stay NJ. This is a senior-citizen property tax rebate program, in addition to existing ones such as Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) and the Senior Freeze.  

The cost of maintaining Stay NJ has been high. According to the New Jersey Policy Perspective, Stay NJ carries a price tag of $1.2 billion, which would increasingly benefit the wealthiest in the state due to the high-income limit of $500,000. This new proposal would reduce the income limit to $200,000 and taper off the maximum benefit.  

By reducing the income limit and some of the generous benefits, the program would still cover 80% of seniors in the state while saving the state more than $550 million. This type of property tax “relief” that turns to state spending to compensate for costly, undisciplined local governments should be avoided. States are much better off focusing on restrictions on property tax growth, limiting the growth of local governments, and accountability to taxpayers. Given that New Jersey ranked 42nd in property tax competitiveness (Tax Foundation), their current strategy is not working.