New Jersey Business Leaders Fear Budget Could Raise Costs

💼 Business groups warn Gov. Mikie Sherrill’s first budget could raise costs for employers through new fees and tax changes.

🏥 Proposed Medicaid employer assessment may penalize companies even if they already provide health insurance to workers.

📉 Tax policy tweaks and spending pressures add to concerns as layoffs and corporate relocations mount in 2026.

Businesses Face New Costs in Sherrill’s First Budget

New Jersey’s business community is warning that Gov. Mikie Sherrill’s first state budget, while attempting to rein in spending growth, could still increase costs for employers already facing some of the highest taxes in the nation.

On Tuesday, Sherrill unveiled a record $60.7 billion spending plan that includes a series of tax policy changes aimed at generating new revenue while reducing the state’s structural deficit. Many of these changes are a defacto tax hike on businesses and the increased costs of doing business in New Jersey will inevitably be passed on to the consumer.

Several proposals affecting businesses—particularly a new employer Medicaid assessment and limits on certain tax deductions—are also raising alarms among business leaders who say Sherrill's plans could discourage hiring and investment in the Garden State.

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Employer Medicaid Fee Raises Biggest Alarm

The most controversial element for businesses is a proposed per-employee fee on companies with more than 50 workers whose employees rely on Medicaid for health coverage.

The measure is intended to help offset rising Medicaid costs, but critics say it could punish companies even if they already offer health benefits.

“This is perhaps the most troubling part of the budget proposal for the business community,” said Christopher Emigholz, chief government affairs officer for the New Jersey Business & Industry Association.

“This establishes a situation where employers can be penalized even if they offer health coverage for their workers, which is already one of the largest expenses they absorb every year,” Emigholz said.

He added that many companies may not even know how many employees are enrolled in Medicaid, making the financial impact difficult to calculate.

“There are industries with high turnover rates. Some employees actually choose not to work more hours so they can keep certain government benefits. And it creates a disincentive for businesses to employ part-time and seasonal workers,” he said.

Business leaders say the fee could hit sectors such as retail, hospitality, childcare and home health services particularly hard—industries where profit margins are already thin and labor costs are rising.

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Business Tax Changes and Deduction Limits

In addition to the Medicaid assessment, the budget proposes several technical changes to corporate tax rules that could affect how companies manage losses and deductions.

Among them is a temporary three-year limit on Net Operating Loss (NOL) deductions, a policy that allows businesses to offset current profits with losses from previous years.

Emigholz said the change would partially roll back reforms previously negotiated with state officials.

Layoffs and corporate relocation already underway in 2026

Even before the new tax changes and increase surcharges were announced, there have been an alarming number of layoffs across nearly all sectors of the New Jersey economy.

In addition to the layoffs, corporate relocations and out-of-state investment are also increasing.

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ExxonMobile announced it was moving its corporate headquarters from New Jersey to Texas where the business tax climate is more favorable.

Johnson and Johnson, a heritage Fortune 500 company in New Jersey also announced it was investing $1 billion in a new manufacturing facility in Pennsylvania. The new facility will create thousands of temporary construction jobs and 500 highly skilled permanent jobs.

Business Group Sees Some Fiscal Discipline

Despite the concerns, the state’s largest business association also acknowledged positive elements in Sherrill’s spending plan.

Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, said the proposal attempts to address fiscal pressures after years of escalating state spending.

“Today the Sherrill administration proposed an attentive budget through a transparent process, as promised,” Siekerka said. “There is intent with this budget to find efficiencies and the start of necessary, and yes, difficult, spending reductions to right our fiscal ship after years of unsustainable budgets.”

Siekerka pointed to $2 billion in spending cuts, a smaller structural deficit and the state’s sixth consecutive full pension payment as encouraging signs.

“We appreciate that the budgetary challenges facing New Jersey are not exclusively being thrust upon our already beleaguered business community, which was too often the case in recent years,” she said.

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Calls for Reform as Fiscal Pressures Grow

Still, business leaders say the state must avoid policies that could further weaken our competitiveness at a time when several major employers have announced layoffs or relocations in 2026.

Siekerka also urged lawmakers to avoid last-minute spending additions during the budget process, warning that legislative earmarks have worsened New Jersey’s fiscal challenges.

“We encourage the Sherrill administration and the Legislature to unequivocally apply discipline to avoid clandestine, add-on spending for local expenditures,” she said.

As budget negotiations begin in the Legislature, the business community says it hopes to work with the administration to adjust the proposals before the spending plan is finalized.

“As we further assess the budget and details contained within it,” Siekerka said, “we look forward to working with the Sherrill administration and Legislature to make this a fair budget and one that positively impacts affordability and regional competitiveness.”