Would a 'Millionaire’s Tax' Help New Jersey? The Governor Thinks It Will.
By Andrew Seidman
New Jersey Gov. Phil Murphy is proposing a higher marginal tax rate on income above $1 million, apparently undeterred by lawmakers’ rejection of that same proposal last year.
Murphy’s $38.6 billion proposed budget for the fiscal year that begins July 1, to be unveiled during a speech to the Legislature that began shortly after 2:15 p.m. Tuesday, represents a 3 percent increase in spending over last year’s proposal. Inflation is around 2 percent.
The budget includes a surplus of nearly $1.2 billion, up from $743 million in the governor’s fiscal year 2019 proposal. The administration largely attributes the cushion to projected savings to be achieved through negotiations with public-sector labor unions.
Murphy, a Democrat elected in 2017 to succeed Republican Chris Christie, has argued that a so-called “millionaire’s tax” would help lift the middle class by providing funding for priorities like education.
He heads into budget negotiations after signing into law a measure that will raise the minimum wage to $15 an hour for most workers by 2024.
State government nearly shut down in July as Murphy and the Democratic-led Legislature fought over taxes. Ultimately, they agreed to raise the top marginal tax rate from 8.97 percent to 10.75 percent on income exceeding $5 million. They also enacted a four-year surcharge to the corporate business tax.
The Murphy administration says the current top marginal rate applies to 6,700 people, most of whom live out of state but generate some income in New Jersey. The expansion of the top rate would apply to 18,000 New Jersey residents and even more taxpayers out of state, raising a projected $447 million next fiscal year.
The tax hike could be a tough sell to lawmakers, as all 80 members of the Assembly are up for election in November.
Meantime, Senate President Steve Sweeney (D., Gloucester) has been traveling the state to promote “major structural reforms” in state government, such as moving new hires into a “hybrid” pension system and aligning public workers’ health benefits with those in the private sector.
Sweeney repeatedly pushed for a higher tax rate on income above $1 million during the Christie years, but has said that President Donald Trump’s federal tax overhaul changed his calculus because it capped a popular deduction on state and local taxes.
Murphy, a former Goldman Sachs banker, faces other headwinds. As of February, 40 percent of New Jersey residents disapproved of Murphy’s job performance, up from 28 percent in April 2018, according to a Monmouth University poll. The portion of residents who approved of the job Murphy was doing, 44 percent, was virtually unchanged.
In addition, the state is facing a projected revenue shortfall for the fiscal year that ends June 30, and the Wall Street ratings agency Standard & Poor’s has warned that an influx of tax collections in April might not make up the difference.