New Jersey Millionaires’ Tax Must Wait for Another Day

The 2020 presidential election in America overrides the importance of the "millionaires' tax" in New Jersey.

Phil Murphy
Governor of New Jersey Phil Murphy. Kevin Mazur/Getty Images for iStar

New Jersey has assigned the unfortunate nickname of “millionaires’ tax” to a bill that promotes the concept that people who make more money should pay more taxes. While it hardly seems unfair or unreasonable, the conservative right has labeled the bill “progressive” or “socialist,” and Fox News-watching America believes it.

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While it is sad that a “tax fairness act” or a “tax equity bill” might have been harder for the right to turn its base against it, the damage to the “millionaires’ tax” has been done. A good idea that New Jersey’s two-house majority legislature should have passed within the first hundred days of Governor Phil Murphy’s administration must now wait.

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This bill is only one part of Murphy’s vision for a fairer and level playing field for the people of New Jersey. It seeks to raise the gross tax rate to 10.75 percent on incomes of $1 million and above. Increasing tax on the state’s top earners is a well-intentioned proposal and would succeed in generating much-needed funding for education, infrastructure and other worthy initiatives. The bill, coupled with a tax on legalized cannabis, could have rolled back or frozen regressive taxes that hurt working families, such as the sales tax and gas tax.

Unfortunately, because of political infighting, the Democratic Party is split in its support for this legislation. The unifying core value that the “millionaires’ tax” legislation represents has been lost. Nevertheless, pursuing it further before the presidential election would create a false public policy flag for dissident Democrats and create another talking point for national Republicans to point to “socialist” Democratic ideas. At this time, the 2020 presidential election in America overrides the importance of the “millionaires’ tax” in New Jersey.

Millionaires’ Tax Reinforces Progressive Stereotypes

New Jersey isn’t the only state considering a millionaires’ tax. Similar efforts are underway in states such as Massachusetts and California. Several Democratic presidential hopefuls have also proposed tax plans that include increasing taxes on the wealthiest Americans as a means to raise revenue and address economic inequality.

While the idea may have merit, progressive Democrats may be missing the big picture. If the party does not move to the center and show the American people that it is not trying to play Robin Hood, then the 2020 election will become a replay of Nixon versus McGovern. In 1972, incumbent Richard Nixon beat Democratic Senator George Mcgovern of South Dakota by a landslide. The secret to Nixon’s success: portraying McGovern, who campaigned on immediately ending the Vietnam War and establishing guaranteed minimum income, as a radical left-wing extremist.

The millionaires’ tax reinforces the liberal, progressive agenda message. The America that watches Fox News is told to believe that the liberal wing of the party led by Bernie Sanders and Elizabeth Warren is the mainstream of the party. Meanwhile, the message from the center of the party—the Clinton Democrats, the Blue Dog Democrats, and 2020 candidates like Cory Booker and Joe Biden—is not getting heard.

Alienating Voters Needed to Win in 2020

The proposed millionaires’ tax, as drafted, applies to LLC income. That means that it will affect tax returns for doctors, lawyers, consultants, architects, engineers and other professionals who report “phantom” income as “profit” (i.e., they pay tax on money they don’t really have). They are New Jersey’s largest employers. They are also some of the Democratic and Republican parties’ top supporters and donors.

Adjusting the bill to make it inapplicable to LLC income would be an easy tweak. Broadening the bill and calling it a “tax equity act” would achieve a better result without risking centrist and conservative Democrats joining the anti-Murphy dissidents.

Rather than fighting amongst themselves, Democrats should direct their focus to taking back the White House in 2020. Democrats must find a nominee and create a platform that attracts swing voters that might be happy with Trump’s economic policies but question his social views and fitness for office. If the party leans too far left, however, it will ensure Trump’s reelection and put its progressive proposals on hold for another four years.

Donald Scarinci is a managing partner at Scarinci Hollenbeck—read his full bio here.

New Jersey Millionaires’ Tax Must Wait for Another Day