Gov. Mikie Sherrill’s first budget has drawn cautious optimism from New Jersey’s business community despite a trio of proposed changes that would raise some companies’ tax obligations

Though some were wary of tax changes that would raise levies on New Jersey’s businesses by roughly $750 million, industry lobbying groups were broadly optimistic about Sherrill’s budget, praising its attempt to narrow gaps between spending and revenues and related efforts to speed permitting and slow growing energy costs.

“If anything, there’s a renewed sense of optimism within the business community,” said Mike Egenton, executive vice president of government relations for the New Jersey State Chamber of Commerce.

The governor’s $60.7 billion budget proposal includes few new revenue raisers, though she has proposed changing two deductions used to write off business losses and creating a fee for employers who have at least 50 workers on Medicaid to support spending in the coming July-to-June fiscal year.

Capping net operating loss deductions, which allow New Jersey businesses to deduct losses up to 20 years old from their income, to $1 million for three years could upset long-term business planning, said Chris Emigholz, chief government affairs officer for the New Jersey Business and Industry Association.

Still, he said he expected limits on the deduction to clear the legislature in some form. Changes to net operating loss deductions are the largest of the revenue raisers Sherrill has proposed, and Treasury officials forecast they will raise collections by $485 million in the fiscal year that begins July 1.

“If you have a law and somebody plans around that law and then all of a sudden you pull the rug out from under them, it makes it less likely that they’re going to want to invest in the state. They’re going to find somebody that’s a little bit more stable,” Emigholz said.

Others warned changes to the alternative business calculation deduction, which sole proprietors, partnerships, and S corporations use to subtract losses from their income, could make New Jersey less competitive to its peers.

Sherrill has proposed halving the benefit for firms with more than $500,000 in gross income and ending it altogether for those with more than $1 million. Business groups say that threshold could harm small businesses with thin margins, adding net income would be a more appropriate threshold.

“Once you get down to the lower numbers, the lower digits, you’re really jeopardizing a small business owner because they don’t have the resources,” Egenton said.

The change is expected to raise revenue by $120 million in fiscal 2027.

But a proposed fee for employers with at least 50 workers on Medicaid has drawn the largest concern, including worries over whether the fee would count seasonal or part time workers, as well as those with disabilities.

The per-worker fee would range between $325 and $725, depending on the number of Medicaid-insured workers at a given firm and is expected to raise $145 million.

“This is one I think is the worst business proposal in the budget,” Emigholz said.

Despite their concerns, New Jersey’s business lobbies have repeatedly expressed optimism about the new governor’s budget, praising moves to limit spending growth, simplify state bureaucracy, and freeze energy prices that are an outsized concern for large-load industrial and manufacturing firms.

When Sherrill appeared before the Chamber of Commerce of Southern New Jersey last month, Christina Renna, the group’s president and CEO, said her proposal included no new taxes, undercutting arguments from some Republican lawmakers that the proposed rules amounted to new levies.

Though the governor’s proposed revenue raisers were mentioned at the early March event, that mention was brief, and the discussion immediately moved onto Sherrill’s plans to speed permitting, slow growing electricity prices, and boost transit options in South Jersey.

That optimism has spread to others in industry weary after eight years under Gov. Phil Murphy, a former Goldman Sachs executive who, as the most progressive governor in state history, raised taxes on high-earning individuals and businesses to help fuel billions in new state spending.

On top of permitting reform, Emigholz noted Sherrill’s goals to improve occupational licensing and raise staffing levels at the Departments of Environmental Protection and Banking and Insurance.

“It’s kind of putting money where her mouth is. She’s investing in all those things she’s laid out, whether it’s DEP, DOBI, occupational licensing, permit dashboard,” he said. “We have to give her credit because how many times have we all heard politicians — Republicans and Democrats alike — that say something that sounds good in a campaign, but are they really prioritizing that in their budget?”