With the state’s revenues still tumbling from a pandemic that saw businesses shuttered for months, Gov. Phil Murphy is again seeking to make good on one of his chief campaign promises — a millionaire’s tax.
For the third year in a row, Murphy is asking lawmakers in the legislature to increase the marginal tax rate for individuals who make more than $1 million per year to 10.75%, from 8.97%, the same rate currently levied on those making more than $5 million annually.
“Building a stronger New Jersey requires us to ask those who, in some cases, continued to prosper as this pandemic raged around us — and most certainly were hurt less — to do more so we can strengthen the middle-class families who are the backbone of our state,” the governor said. “That means that the wealthiest among us — millionaires and large corporations — need to pay their fair share in taxes, whether it be on income or in buying a yacht.”
The Treasury predicts the tax will bring in $390 million in revenue over the next nine months. Democratic leaders in the legislature have staunchly opposed the policy since Murphy took office, and there’s been little indication that they’ll be more willing to support the proposal with New Jersey’s unemployment rate up to 13.8%.
Totaled, revenues are projected to be $5.6 billion lower than they were in Murphy’s February budget address.
The bulk of that money, $4 billion, will be borrowed under a plan signed into law last month, though it’ll have to first be approved by a legislative select commission on borrowing, and the repayment terms for that borrowing haven’t been set into stone.
Much of that money, as much as $2.2 billion, would go directly to the state’s surplus to guard against a renewed surge of COVID-19.
“This surplus is not a luxury. It is a product of lessons learned: Think ahead, be prepared,” the governor said.
Murphy’s new budget calls for a variety of other new taxes and fees to make up for the budget shortfall.
The governor wants to make a 2.5% surtax on corporate businesses permanent. That policy would bring in roughly $210 million over the next nine months, according to the Treasury.
He’s also seeking to increase the tax on cigarettes from $2.70 per pack to $4.35 per pack to bring in roughly $143 million.
A two-percentage-point increase to an assessment applied to health insurers in the state is projected to bring in about $103 million, and a proposed 5% surcharge on certain businesses with more than $1 million in revenue is estimated to collect $75 million.
A restoration of a limousine sales tax is estimated to bring in $13 million, and a removal of a sales tax cap for boat purchases is projected to bring in $7 million.
The governor is also again seeking to increase taxes and fees on purchases of firearms and ammunition. Those proposals would bring in a little more than $6 million.
The state will continue to increase the size of its pension contributions, with a proposed payment of about $4.9 billion slated for fiscal year 2021. School aid is level at $8.7 billion.
New Jersey will seek to cut its spending by $1.25 million, with the lion’s share, $336 million, coming from reductions to Medicaid costs from an increased federal cost share, rate adjustments and lower utilization, among other things, a senior administration official said.
“We have made deep cuts and found necessary economies where we needed to. But we are also making down payments on investments that will make our state stronger and fairer for generations to come. But, this budget is not about simply getting back to where we used to be,” Murphy said. “This budget is about moving New Jersey forward to where we need to be — and to a place where have never been before.”
The new budget will also restore funding for the Homestead Benefit and Senior Freeze programs. Those programs will be made whole, including for payments skipped during the height of New Jersey’s COVID outbreak in May.
The total cost of Murphy’s newly proposed nine-month budget comes in at about $32.4 billion. Added to the three-month stopgap budget passed in June, that brings the 12-month costs to about $42.6 billion.
It includes a $5 million appropriation for early voting and $15 million for the state’s vote by mail program.
“Together, let’s build a New Jersey that looks forward, not backwards. A New Jersey where we all pitch in so we can all do better. A New Jersey working for all with an economy working for all” Murphy said. “Let’s renew our vow to work on behalf of the millions of New Jerseyans — those here now and those still yet to come — who need us to harness all that is great about this state that we love and proudly call our home.”