Deal reached in New Jersey for ‘millionaires tax’ to address fiscal crisis
By Tracey Tully
Gov. Phil Murphy campaigned on a vow to raise taxes on the rich in New Jersey.
It took three years and a pandemic to get it done.
Murphy, a Democrat, joined legislative leaders to announce a budget deal Thursday that includes a higher tax rate for residents earning more than $1 million a year.
The agreement also includes a recurring $500 rebate for families with at least one child and an annual income of less than $150,000 a year for couples and $75,000 for single parents.
The move, which has been panned by Republicans and some business leaders as a risky step that could lead to an exodus of the state’s wealthiest residents, comes amid a growing national debate over whether to increase taxes on the rich to help address a widening income gap.
Joe Biden, the Democratic nominee for president, has proposed raising taxes on people earning more than $400,000 to finance a slate of programs, including expanded day care.
In New Jersey, the so-called millionaires tax was an initiative the Democrat-led Legislature had symbolically approved for years before Murphy took office in 2018, knowing that it would never be signed into law by former Republican Gov. Chris Christie.
But Murphy, a self-avowed progressive who arrived in Trenton with few legislative allies, had been unable to win support for the idea from Senate President Stephen M. Sweeney, a political rival, or Assembly leader Craig J. Coughlin.
Facing a fiscal crisis brought on by the urgent health needs of the pandemic and the monthslong shutdown of businesses, lawmakers agreed to raise the tax rate on earnings over $1 million to 10.75%, up from 8.97%. Individuals earning more than $5 million were already taxed at the higher rate.
The deal underscores the shifting political climate and a recognition that the wealthy may need to contribute more to the state’s recovery with so many residents out of work and struggling to feed their families. More than 1.5 million residents have filed for unemployment benefits since Murphy implemented a lockdown to help stop the spread of the virus, which has led to the deaths of more than 16,000 New Jersey residents.
The agreement is also a tacit acknowledgment of Murphy’s approval ratings, which jumped to 71% in a recent poll by Monmouth University.
Coughlin and Sweeney, both Democrats, joined the governor for a 10 a.m. announcement of the deal.
“Our promise to help the middle class and those striving to join it is a promise that will be kept,” Murphy said.
In neighboring New York, Gov. Andrew Cuomo, a fiscal moderate, has largely resisted proposals to raise billions by taxing the wealthy. Cuomo has consistently called on the federal government to bail out the state, which he says needs some $59 billion to cover two years of projected deficits for state and local governments.
Progressives in Albany have been pushing the governor to consider a variety of bills, including one to raise the tax rate on those earning more than $100 million to almost 12%.
New Jersey’s millionaires tax is expected to generate an estimated $390 million this fiscal year. The $500 rebate, a compromise put forth by Coughlin, is expected to cost about $340 million a year.
The millionaires tax is part of a nine-month, $32.4 billion spending plan that must be adopted by Oct. 1. The proposed budget Murphy released last month also includes about $1.2 billion in spending cuts and $4 billion in new bonding debt.
The deal, first reported Wednesday by the New Jersey Globe, was immediately criticized by the state Republican Party.
“Blink and you’ll miss the next Trenton tax hike,” the state’s Republican chairman, Doug Steinhardt, said in a statement. “That’s how fast Phil Murphy and his Democrats are spending your money.”