The record $37.4 billion state budget proposed this month by Gov. Phil Murphy counts on $1.5 billion in new and higher taxes in a state already a national leader in tax burden.
New Jersey hasn’t seen an effort to raises taxes by more than a billion dollars in nine years — the last time a Democrat held the governorship. Perhaps not coincidentally, that governor was also a wealthy former Wall Street executive, Jon Corzine.
It was Corzine who increased the state sales tax from 6 percent to 7 percent. Murphy would return it to that level after a small reduction last year, taking in an additional $580 million a year.
Murphy’s biggest source of more revenue would be a higher tax on those with incomes of a million dollars or more. That is expected to raise $765 million. Increased taxes on businesses would yield $110 million, and the governor’s proposed legalization and taxing of marijuana for pleasure another $80 million.
Senior, disabled and low-income homeowners won’t pay more taxes than last year, but neither would they get the tax relief the Murphy campaign promised. His budget would leave the Homestead property tax credit cut in half.
Like his predecessor, Murphy may find it difficult to get the Legislature to provide all of this additional tax revenue. Corzine’s fellow Democrats shut down state government for a week to get a big chunk of his billion-dollar increase devoted to property-tax relief.
This time Senate President Stephen Sweeney is countering with a proposed tax surcharge on businesses that would give the state about $650 million of their savings from the federal business tax cut.
Each of these increases or new taxes would hurt — either residents, businesses, the economy or all of the above.
Returning to a millionaires’ tax seems natural for a Democratic administration, but this time there’s concern that piling it on top of the reduced federal deduction for state and local taxes might unacceptably increase the flight of millionaires from New Jersey to Pennsylvania, Florida and other lower-taxing places.
The easiest tax would be on marijuana. But that presumes its legalization, which may be harder to do than the other tax increases.
The total proposed increase in New Jersey’s tax burden is too much, and we hope the Legislature substantially reduces it. But just as worrisome is how little of all this added taxation would help improve New Jersey’s dire financial condition.
Murphy plans to spend an additional $283 million on schools and increase the state subsidy of NJ Transit by $242 million. Those will only worsen state finances going forward.
Even his increasing the state employee pensions contribution to $3.2 billion only sticks to the plan made by Gov. Chris Christie. Under that, the state wouldn’t start making full payments to the pension fund until 2023, when it will take $5 billion from the annual budget.
Meanwhile, the latest Treasury Department report says New Jersey’s bonded debt has reached nearly $48 billion. Add in the $155 billion in unfunded obligations to government worker pensions and health plans, and the state will need $200 billion going forward.
Murphy made clear his intention to tax and spend during his successful campaign, and so far that’s what he proposes. We hope at some point he applies his financial skills to putting New Jersey on a path to a better fiscal future.