Murphy rolls out New Jersey millionaire's tax proposal for third time
New Jersey Gov. Phil Murphy is continuing his push for a "millionaire’s tax" after lawmakers rebuffed him during his first two years in office.
Murphy said in his third State of the State address Tuesday that he was not giving up on a proposal first unveiled during his 2017 campaign for governor to raise tax rates on incomes above $1 million, which his administration says would net the state around $450 million of new annual revenues. He didn't detail specifics.
Murphy's previous proposals to raise the marginal rate on annual income above $1 million to 10.75% from 8.97% were blocked by opposition from fellow Democrats in the legislature. The state already levies a 10.75% marginal tax rate for those earning at least $5 million annually.
“Overwhelming majorities of residents — of all political stripes — support this,” Murphy said in the speech. “The millionaires and corporate CEOs made out just fine in the last recession — and, I assure you, they will again when the next one hits.”
Legislative Democratic leaders opposed taxing the wealthy at higher rates citing negative impacts resulting from 2017 federal tax law changes capping deductions for state and local taxes at $10,000. State lawmakers rejected Murphy’s initial bid for a "millionaire’s tax" in 2018 resulting in the governor signing a compromise budget that increased taxes on income over $5 million and imposed a four-year surcharge for corporations.
“The opposition is still there and still strong and there doesn’t seem to be any indication it is going away,” said Seton Hall University political science professor Matt Hale. “I don’t see a huge change this year.”
Hale said that while many working and middle class residents support Murphy’s proposal, it likely won’t be enough to sway enough of the moderate Democratic senators and assemblyman who have been reluctant to raise taxes. He noted that much of the opposition in New Jersey to hiking income taxes on the wealthy derives from many “aspirational millionaires” throughout the state who earn high incomes just below that threshold.
Senate President Steve Sweeney, D-Gloucester, did not respond to Murphy’s Tuesday speech, but on Monday told reporters he remains against raising taxes. Republicans spoke out against Murphy’s "millionaire’s tax" pitch following the speech noting that such a move would drive away residents.
“We see that there is an exodus of people from this state because of high property taxes, because of the high sales tax, because of high income taxes and because of high corporate taxes,” Assembly Minority Leader John Bramnick, R-Westfield, told reporters. “His own Democratic Assembly and Senate believes he is too far to the left.”
Murphy is slated to introduce his 2021 fiscal year budget with a "millionaire’s tax" attached to the spending plan in late February. The governor didn’t reveal specific budget plans Tuesday, but told lawmakers he will soon be announcing a 10-year strategic plan and five-year capital plan for New Jersey Transit.
Past structurally unbalanced budgets coupled with the Garden State’s steep pension burden drove 11 bond rating downgrades under previous Gov. Chris Christie between 2011 and 2017. New Jersey’s general obligation debt is rated A-minus by S&P Global Ratings, A3 by Moody’s Investors Service and A by Fitch Ratings and Kroll Bond Rating Agency.