Governor Phil Murphy’s third shot at a higher tax for New Jersey millionaires may be the charm.
The first-term Democrat proposed a record $40.9 billion budget with a tax boost for the rich to help underpin unprecedented spending on New Jersey Transit, pensions and schools.
His odds are far better this year, with Senate President Stephen Sweeney saying he’d consider the levy if the governor would consider an even bigger-than-planned pension payment.
“I thank the Senate president and welcome his willingness to embrace a millionaire’s tax in this budget,” Murphy said Tuesday to lawmakers in Trenton. “When we have tax fairness, we can continue our historic investments in our pension systems and in our middle-class families.”
Murphy, 62, a Democrat and retired Goldman Sachs Group Inc. senior director, said his spending plan for the year that starts July 1 strikes a balance of fiscal responsibility and progressive spending.
Surplus Fund
He is seeking a record $589.5 million for NJ Transit, the ailing commuter bus and rail operator that he has pledged to rebuild. His budget also include an historic $4.6 billion pension payment. That’s in addition to about $300 million being pre-paid now toward 2021 because obligations increased slightly due to longer life expectancies and other factors, according to treasury officials.
Cigarette taxes would rise more than 60%, to $4.35 per pack, among the highest levied by U.S. states. New Jersey also would charge a “corporate responsibility fee” to companies with more than 50 employees enrolled in Medicaid, and raise an estimated $20 million from opioid manufacturers and distributors to help combat addiction.
While 13.2% of the state budget relied on one-time resources in 2010, Murphy’s 2021 spending plan calls for less than 1%. Murphy also called for building the state’s surplus to $1.6 billion, for a fund balance equal to 4% of the budget. The national average is about 11%, according to the administration.
“A stronger surplus and another payment into the rainy day fund are important signs to New Jerseyans that we, like them, understand that we can’t rush out and spend everything we have, without regard to future risks,” Murphy said. “It sends an unmistakable signal to the credit-rating agencies that we will not follow the irresponsible ways of the past that led to 11 consecutive downgrades.”
Progressive Values
Since Murphy came to office in January 2018, many lawmakers have called his progressive agenda too costly, and twice blocked his proposal to raise taxes on those who earn at least $1 million a year.
Murphy wants to increase the marginal tax rate on every earned dollar over $1 million to 10.75% from 8.97%, for $494 million in annual revenue. That rate currently is on $5 million or more. The change would apply to about 42,000 taxpayers, more than half who live out of state but earn income in New Jersey, according to the governor’s office.
The budget would add $50 million to fund tuition-free college at four-year institutions, an expansion of a plan in community colleges. It would give $20 million to support apprenticeships, paid internships and career training.
It proposes $1.26 billion in direct property-tax relief, an increase and eligibility expansion for the earned income tax credit and the elimination of income tax on combat pay.
“It isn’t the wealthy who bear the burden of our tax system – it’s the middle class,” Murphy said.
Spending Growth
Senate Republican Leader Thomas Kean Jr. said the 5.5% spending growth in Murphy’s budget isn’t what the state needs.
“This budget is a continuation of disastrous fiscal policies that are breaking up too many of our families,” Kean said in a statement. “This proposal doesn’t move the needle on giving people a reason to stay in New Jersey.”
Murphy’s NJ Transit subsidy proposal is a 29% boost, partly coming from funds for highway tolls and fees on energy ratepayers, as well as shifts from capital-improvement accounts to fund day-to-day needs. That subsidy had dipped to $33.2 million in 2016 under Republican Governor Chris Christie, while breakdowns, safety violations and service delays soared.
Sweeney, a fellow Democrat and New Jersey’s highest-ranking lawmaker, wants to maintain the corporate tax rate as an ongoing revenue source for NJ Transit. He also would ban the practice of capital-to-operating fund transfers.
In a statement after the speech, Senate Majority Leader Loretta Weinberg, a Democrat from Teaneck, said she “will push for immediate reductions in capital-to-operating transfers as part of this year’s budget process.”
Sweeney, who often is at odds with the governor over his higher-tax agenda, has said he’ll stop blocking the millionaire’s tax if the governor promises an additional $1 billion for the pension payment. Even with that boost, the fund would fall short of the $6.1 billion actuarially required contribution.
Murphy’s budget plan includes cutting public-worker health care costs by $174 million. About $100 million of that would come from changes pushed by the New Jersey Education Association, which helped get Murphy elected.
This article was provided by Bloomberg News.
