WASHINGTON — Gov. Phil Murphy said Thursday that he still wants to raise taxes on millionaires to pay for a multitude of state programs, potentially setting up a showdown with Senate President Steve Sweeney over the state budget.
Murphy, a Democrat, doubled down on his call for a millionaires tax during a dinner speech following the 81st annual Walk to Washington, arguing tax hikes on the wealthiest residents and largest corporations could pay for crucial investments in infrastructure and education. His remarks suggested he may anticipate revenue from a tax hike on incomes over $1 million in his first proposed state budget, which he is set to unveil on March 13.
“It comes down to asking the following: Do we continue to hollow out the very core of our state, of our society, or do we ask the wealthiest and the biggest corporations to pay their fair share?” Murphy said. “I remain committed to a true millionaires tax and to closing corporate tax loopholes that frankly most states have closed long ago.”
But Murphy added a new wrinkle to his proposal, saying he would consider sunsetting such a tax hike if the economy begins to grow.
“Any given tax policy need not be a permanent addition, and if we get this economy growing again and it will, and we get that money-value equation back into balance and we will, we should be prepared to recalibrate and reconsider,” he said.
Earlier in the day, Murphy declined to say whether he would budget revenue from a millionaires tax when asked about it directly during an unrelated news conference. But he did say that his speech would “start to lay out a little bit more of the blueprint” for his upcoming budget proposal.
Murphy’s push for a millionaires tax could put him on a collision course with Sweeney (D-Gloucester), the legislature’s top lawmaker who has lately resisted the idea of raising taxes.
Sweeney, who has supported a millionaires tax in the past, has said the new federal tax law has forced him to re-examine any plans to raise taxes. That’s because the tax overhaul capped the state and local tax deduction at $10,000, a move seen as harming high-tax states like New Jersey, which is said to have the highest taxes in the nation.
Murphy appeared to address that argument during his 25-minute speech before lawmakers, lobbyists and business leaders. He said the Republican-led federal tax law created windfalls for the wealthy and big businesses.
“We have to acknowledge the fact that a New Jerseyan earning more than $2 million just got a $60,000 tax break from the feds, before we factor in our own efforts to restore the SALT deduction for property taxes,” Murphy said. “Many large corporations received windfalls, some into the hundreds of millions or even into the billions of dollars.”
Murphy campaign officials said in August that the state could raise $600 million by enacting a millionaires tax, which former Gov. Chris Christie vetoed five times over the years when it was proposed in one form or another by Democratic lawmakers. Under the most recent version of that plan, the marginal tax rate on income above $1 million would rise from 8.97 percent to 10.75 percent.
Murphy’s campaign also expects $290 million from closing a tax loophole that allows corporations to shift profits made in New Jersey to lower-taxed states. In addition, the Murphy campaign has said that taxing “carried interest”—or performance fees earned by hedge fund and private equity managers—would generate $100 million a year.
The governor needs this injection of revenue to pay for a host of campaign promises, including more money for schools, tuition-free community college and road and rail projects. He also has to find funds for the state’s cash-starved public worker pension system. The pension fund is due roughly $3 billion this year under a 10-year ramp Christie and Democrats have been following to reach full pension payments in fiscal 2023
But while Murphy has talked about tax hikes on the wealthy and large corporations, Sweeney seems to be going in the opposite direction.
He recently set up a task force to study tax and fiscal policy, and that panel’s recommendations could be used to argue against a millionaires tax. Sweeney has talked recently about municipal shared services and regionalized school districts to cut the high tax burden on homeowners.
“It is now time to have a conversation about government in New Jersey and how much we can afford,” Sweeney said on January 26. On the millionaires tax, he added: “I’m not saying it’s dead, I’m just saying it’s not on the top of my list.”