Murphy’s Millionaire-Tax Proposal Gains Momentum in New Jersey
Governor Phil Murphy’s third shot at a higher tax for New Jersey millionaires tax 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 in remarks prepared for delivery 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.
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 and would build the state surplus, a step that Murphy calls key to rebuilding New Jersey’s credit rating.
“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 in remarks prepared for delivery. “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.”
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 property-tax relief, an increase and eligibility expansion for the earned income tax credit and the elimination of income tax on combat pay.
”Since taking office, we’ve sought to build a stronger and fairer economy for every New Jersey family, not just the wealthy or well-connected,” Murphy said in prepared remarks.
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, for about $460 million for this year.
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 be about $500 million short of the 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.
The governor also would add $1.6 billion to the surplus, building the fund to 4% while the national average is about 11%, according to the administration. In 2010, 13.2% of the state budget relied on one-time resources; Murphy’s staff says his budget calls for .8%, the lowest in at least 12 years.
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