New Jersey progressives seek $3B in state tax revenues for 2021 budget
A New Jersey coalition of progressive lobbying groups is pushing new tax proposals to raise $3.1 billion of new annual revenue, days before Gov. Phil Murphy unveils his 2021 fiscal year budget on Feb. 25.
More than 30 community organizations launched the “For the Many” initiative on Feb. 18 calling for a new approach to state budgeting that reverses past economic policies implemented under previous Gov. Chris Christie from 2010 to 2017. The group’s leaders stressed during a press conference in Trenton that New Jersey has enacted $15 billion in cumulative tax cuts over the past decade that have created barriers for the state to make necessary investments for transportation and public school funding.
“The past few decades of New Jersey budgets have been dominated by shortsighted decisionmaking and trickle-down economics,” Brandon McKoy, president of the left-leaning New Jersey Policy Perspective, said during the press conference. “This has set our state further behind and harmed our ability to make critical investments.”
Much of the $3.1 billion of new state revenue proposed would derive from $1.03 billion netted through raising the income tax on the state’s highest earners. Under the current system, New Jerseyans earning between $250,000 and $5 million are all taxed at 8.97% while those earning above that threshold pay a 10.75% rate.
This week’s tax proposal pitched by the groups call for adding five tax brackets with those earning above $250,000 taxed at 7%, earners above $500,000 at 9% and $750,000 at 10%. They also propose those earning over $1 million to be taxed at 10.75%, above $2.5 million at 11% and higher than $5 million at 12%.
Gov. Murphy, who will announce his annual budget on Feb. 25, has proposed the last three years a “millionaire’s tax” that would raise the marginal rate on annual income above $1 million to 10.75% from 8.97%. Legislative Democratic leaders have opposed taxing the wealthy at higher rates because of negative effects from 2017 federal tax law changes capping deductions for state and local taxes at $10,000.
Progressive groups say another $1.1 billion of yearly tax revenues could be gained by increasing the sales tax back to its previous 7% level and restoring the estate tax. State lawmakers cut the sales tax to 6.625% and eliminated the estate tax in 2016 as part of a compromise deal with Christie to reauthorize the Transportation Trust Fund through raising the gas tax.
The proposals also pitch creating $500 million of new revenue by imposing a state-level “health insurance assessment tax” that was repealed in the 2017 federal tax overhaul. Another $300 million would derive from extending surcharges paid by corporations, which was upped by 2.5% for 2019 and 2020 and is scheduled to decrease by 1.5% next year before expiring in 2023.
The press office for Gov. Murphy did not immediately respond for comment on the proposed tax hikes. The first-term Democratic governor said in his Jan. 14 State of the State address he would once again propose a millionaire’s tax.
New Jersey’s past structurally unbalanced budgets coupled with escalating pension liabilities triggered 11 bond rating downgrades between 2011 and 2017. The Garden State’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. Only Illinois GOs are rated lower of the 50 U.S. states.
“For too many years, our budgets haven't reflected a full accounting of all our state's needs," Doug O'Malley, director of Environment New Jersey, said in a statement. “Our budgets should reflect a long-term vision for our state and account for our full needs and incorporate increased revenue to meet that challenge."