On Tuesday, Gov. Phil Murphy offered a budget compromise to legislators that will hike taxes on the state’s millionaires and corporations and spread a hike in the state sales tax over two years.
It’s unclear if Democratic legislative leaders, who so far have expressed no interest in hiking the millionaires tax or boosting the sales tax, will accept the deal. But they were quick to let it be known they weren’t rejecting the govenor’s overture out of hand.
“We are reviewing the proposal presented by Governor Murphy at today’s meeting with legislative leaders, and we will give his offer full consideration, along with other options we are evaluating,” Senate President Steve Sweeney and Assembly Speaker Craig Coughlin said in a statement, according to POLITICO.
While the measure might make peace among Democrats, Republicans took the plan to task for its impact on residents.
“When the Democrats talk about compromise, they’re still raising taxes on New Jerseyans,” said Assembly Minority Leader Jon Bramnick. “All of their compromises are tax and spend.”
Murphy had originally proposed a budget containing $1.5 billion in new taxes, and the governor has not seemed to back away from that number in his proposal. His plan called for a hike in the state sales tax and a tax on millionaires.
The legislature, led by Sweeney and Coughlin, passed its own budget, which institutes a temporary two-year tax on corporations and projects collecting revenue through a tax amnesty program. Sweeney says a millionaires tax would only drive high wage earners out of New Jersey, while the sales tax increase would add to the state’s already notoriously high tax burden. But Murphy has said he wouldn’t back the corporate tax, since it didn’t provide an ongoing source of revenue and would give New Jersey the highest corporate tax rate in the nation.
In a letter to Sweeney and Coughlin, Murphy proposed:
- A permanent increase in the corporate tax rate, but one that “does not make New Jersey an outlier nationally;”
- A “modest” increase in taxes on millionaires;
- And a two-year phased-in increase of the sales tax back to seven percent.
The sales tax had been cut in 2016, as part of a deal with then-Gov. Chris Christie to hike the state gas tax by 23 cents per gallon. Murphy has indicated it’s likely the gas tax will go up another 3 cents per gallon this fall.
Murphy’s letter also indicates that the governor is already planning on imposing taxes on internet purchases, saying while such a move will provide “some additional flexibility,” it didn’t alter the need for the other additional taxes. Murphy’s letter did not address revenue from a 5-cent tax on paper and plastic shopping bags that the legislature has approved but he has not yet signed.
Murphy said if Democrats accept his compromise, he’d be willing to restore Homestead Rebate funding to prior levels and a change in the state’s school funding plan pushed by Sweeney.
Murphy, whose budget includes increases in aid for schools and NJ Transit as well as additional pension payments and programs to provide free community college to low-income residents and expand pre-k programs, has said New Jersey residents—who already bear one of the highest tax burdens in the nation—won’t mind paying more if they feel they are getting their money’s worth from state services.
Quote of the Day: “All of their compromises are tax and spend.”— Assembly Minority Leader Jon Bramnick, on Gov. Phil Murphy’s budget compromise plan to raise the state sales tax and millionaires tax like he wants and the corporate tax, as sought by Democratic legislative leaders.
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