New Jersey Governor Phil Murphy (D) has proposed his first budget, and it’s loaded with new taxes and tax policy that is intended to raise approximately $1.6 billion in new tax revenue.
The tax increases are being met with mixed reactions from New Jersey Democrats; some favor the proposals, some don’t think they will raise enough money for Murphy’s progressive agenda, and some are opposed to a key new tax, the millionaire’s tax.
Gov. Phil Murphy unveiled an ambitious progressive agenda Tuesday when he pulled back the curtain on his $37.4 billion state budget proposal.The spending plan is a $2.7 billion jump over the state’s last budget signed by former Gov. Chris Christie, a Republican.Murphy, a Democrat, wants to, among other things, fully fund schools and the state’s ailing pension system. Other items include free community college for some residents and boost funding for NJ Transit.Of course, all of that takes money.Murphy’s blueprint includes some $1.6 billion in new taxes to fund his ambitious agenda.
Among the proposed tax increases are: an increase in the sales tax, taking it back to 7%; new taxes on Uber, Lyft, Airbnb, online sales, and recreational marijuana (not currently legal in NJ, by the way); a millionaire’s tax; and the closing of corporate loopholes.
Mr. Murphy said that his proposal relies on several new taxes: restoring the state sales tax to 7 percent from 6.625 percent, closing the carried interest tax loophole and raising the marginal income tax rate on those making over $1 million to 10.75 percent from about nine percent.The so-called millionaire’s tax has become a political lightning rod for the governor as his nascent administration navigates entrenched political power bases in the state Legislature. Stephen M. Sweeney, the Senate president, opposes the new tax and he has numerous allies who often vote with him.
While Mr. Christie was still in office, many Democrats, including Mr. Sweeney, supported Mr. Murphy’s proposal to raise taxes on the wealthy. But because the new federal tax law caps a key tax deduction on property taxes and mortgage interest, Mr. Sweeney and other Democrats argued that any new tax would be untenable.
The standoff has soured the already frayed relations between Mr. Murphy and Mr. Sweeney. Last week, Mr. Sweeney announced a proposal to raise taxes on corporations. Mr. Murphy called the proposal interesting, but vowed to pursue his proposal. This will likely be the biggest sticking point during budget negotiations for the next fiscal year, which starts on July 1.
Given this dynamic and the need for the budget to be passed by the New Jersey senate, the proposed millionaire’s tax is unlikely to stand. This means that New Jersey will eventually see new taxes or tax increases in areas that don’t hit the politically-connected.
It seems unavoidable that New Jersey’s middle classes will be hit with new and increased taxes to pay for Murphy’s progressive agenda.
The NYT continues:
“For everyone who cares about common-sense gun safety laws, a 100-percent clean energy future, women’s health care, the rights of our L.G.B.T.Q. brothers and sisters, or immigration policies that are sensible, that allow diverse and safe cities to flourish, the pull of New Jersey will become inescapable,” Mr. Murphy said.
Reuters has more details about Murphy’s progressive agenda.
Murphy’s campaign pledges included raising the minimum wage to $15 an hour, increasing school aid, making community college free and divesting state investments in hedge funds.
“This is a watershed moment in the state’s history,” said Brigid Harrison, political science professor at Montclair State University in Montclair. “The governor went into this making all kinds of promises … all of which cost money.”
While Murphy dreams of brand new taxpayers unable to resist the pull of a progressive New Jersey, the president of the New Jersey Chamber of Commerce notes, “All of his funding proposals need to be fully vetted and analyzed in the context of keeping New Jersey competitive and affordable.”
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