New Jersey will boost the tax rate for residents making more than $1 million annually and use much of the new revenue to fund a tax rebate program for families making less than $150,000 per year, the state’s top Democrats announced Thursday.
“We will provide a maximum $500 tax rebate for middle class and low-income working families with at least one dependent child with income limits of either $75,000 for a single parent household or $150,000 for a married couple,” Gov. Phil Murphy said.
The deal, first reported by the New Jersey Globe Wednesday, is a long-sought victory for Murphy, who will see one of his core campaign promises fulfilled amid a global pandemic that has raised his national profile and sent the state’s finance into a fiscal tumble.
Under the deal, the marginal tax rate for those making more than $1 million per year would climb from 8.97% to 10.75%, the same rate currently charged on income over $5 million. The administration expects the new tax to bring in an additional $390 million annually. Much of next year’s millionaire’s tax revenues will be used to fund the rebate program.
“We resisted — and I vocally resisted — the millionaire’s tax for years, and it wasn’t a political thing about the governor or me,” Senate President Steve Sweeney (D-West Deptford) said. “I had a problem with it at the time. But the pandemic hit, and things have changed. And we have to face the reality that as lot of families are hurting here.”
Some amount of the millionaire tax revenues will remain after the rebate program is funded, Murphy said, though it’s not clear exactly how much.
The governor and Assembly Speaker Craig Coughlin, who presented the idea of a middle-class tax rebate to the two other top Democrats, gave different estimates for how many New Jerseyans would be eligible for the program.
Murphy said roughly 800,000 families would be eligible, while Coughlin gave a more conservative estimate of nearly 700,000.
“It’s critically important that we stand up for those families. It has always been a priority for all of us here, to help the middle class as we can,” he said. “Now, many of those families are struggling right now to make ends meet, to afford the everyday necessities that have become more challenging as a result of the coronavirus.”
The rebate will start out as a one-shot, with rebates coming next summer, with payment amounts determined by residents’ April 2021 tax filings, though the millionaire’s tax will go into effect after the new budget is adopted, which will almost certainly happen sometime before Oct. 1.
The announcement was not met with universal acclaim. The state’s Republicans and its business community were quick to condemn the move, warning that a tax hike targeted at high earners would drive New Jerseyans out of the Garden State.
“This tax increase in exchange for suggested middle class relief is a gimmick that further verifies what we have said all along — increased taxes were always completely unnecessary as part of the FY2021 budget that already includes billions in bonding,” New Jersey Business and Industry Association President and CEO Michele Siekerka said.
Though Democratic leaders have reached an agreement on the millionaire’s tax, other revenue bumps are still somewhere in limbo. Yet others have made their way to the cutting room floor.
Though Murphy and the legislative leaders were cagey about other parts of the budget, the governor effectively ruled out the possibility of an increase to the state’s sales tax.
“We’ve all agreed we’re not going to talk about the rest of the budget because we’re still crossing T’s and dotting I’s, but will you all forgive me to say this: The sales tax is not going to be a part of that,” Murphy said.
He was less clear on the fate of a proposal to tax financial transactions in the state and his call to keep the corporate business tax at the level it was raised to in 2018.
These portions of the budget will likely draw sharp opposition from Republicans in the legislature, though with both Sweeney and Coughlin on board, it’s not likely that resistance will amount to much, though it will provide the GOP with something to attack the governor over.
“Once again, Governor Murphy and his allies have failed the people of New Jersey,” Gubernatorial candidate Jack Ciattarelli said. “We should not be raising taxes on anyone in a state that already pays the highest taxes and suffers from the worst rate of outmigration in the nation.”