New Jersey needs new tax increases to combat an “unsustainable” structural deficit, the state’s top fiscal officer told legislative leaders Tuesday.
Acting State Treasurer Elizabeth Maher Muoio said in testimony before the State Senate Budget and Appropriations Committee that $1.56 billion of new taxes are needed in Gov. Phil Murphy’s budget proposal to get New Jersey’s finances in order. She said the new governor’s proposed tax increases are needed to boost reserves in preparation for the next recession and to support funding increases for transportation and schools.
“In this new budget, if we were to propose no new revenues, no new spending, and back out all legislative adds from June of 2017, we would still have a deficit in FY19,” Muoio said in her testimony. “This is not only unsustainable, it’s unacceptable, and the governor is proposing a series of new revenue and budget initiatives to get our fiscal house in order.”
Murphy’s $37.4 billion budget plan outlined on March 13 would impose a new "millionaire’s tax" to add an estimated $765 million in annual revenue. The Democratic governor also wants to revert the state sales tax to its previous 7% level after it was cut to 6.625% under Republican predecessor Chris Christie. He has also proposed closing a tax loophole allowing corporations to shift profit made in New Jersey to lower-taxed states as well as legalizing marijuana as other revenue raisers.
Muoio stated that while the state’s gross income tax grew 13.7% through the end of February, corporate business tax receipts are down 2.2%. Senate Budget chairman Paul Sarlo, D-Wood-Ridge, said that the legislature should hold off on considering tax increases until April receipt totals are determined.
“We may see unprecedented tax collections on this April 15 due date,” Sarlo told reporters. Before discussing new taxes, “we need to get a handle on how much revenue is coming in from this last round of tax collections in the current fiscal year.”
Muoio stressed that the state’s structural challenges stem from changes enacted under the previous administration that have lessened dedicated monies toward the general fund such as lowering the sales tax and phasing out the estate tax as well as devoting New Jersey Lottery revenues to reduce pension liabilities. To address these pressures, Muoio said $788.5 million of energy tax receipts previously given to municipalities will now be directed to the general fund. The state will then provide that same $788.5 million amount to local governments from the Property Tax Relief Fund.
“Since this revenue falls within the sales tax, it can be categorized as general fund revenue,” said Muoio in her remarks. “This accounting change will have no impact on municipal revenues and towns will see no change in the amount of money they receive.”
Muoio is scheduled to speak before the Assembly Budget Committee Wednesday. New Jersey lawmakers have until June 30 to adopt a budget before the new fiscal year commences on July 1.