Governor Phil Murphy unveiled his $37.4 billion budget proposal this week, the largest in State history, which includes more than $1.5 billion in new revenue. The increase in revenue would come from an increase in New Jersey’s sales tax (from 6.625% to 7%), a millionaire’s tax (raising the top income tax rate from 8.97% to 10.75% on income over $1 million), and closing several corporate tax loopholes (including carried interest), among other proposals. It should be noted, there was no effort to reinstate the Estate Tax.
The Governor faces pushback from Republican lawmakers and some in his own party, including Senate President Stephen Sweeney and Assembly Speaker Craig Coughlin, particularly with regard to his millionaire’s tax proposal. While Democrats are on the same page regarding the policies they hope to enact, now that they control the Senate, Assembly and Governor’s office, there is disagreement on HOW those policies should be paid for.
Senator Sweeney has proposed a 3% increase in the corporate tax rate (from 9% to 12%) for companies earning more than $1 million in annual net income as an alternative to the Governor’s millionaire’s tax. He feels the federal tax reform legislation passed in December 2017, which limits state and local tax deductions to $10,000, will hit many individuals in high-tax states (like New Jersey) particularly hard.
Governor Murphy has been steadfast in his position that the State needs to generate more revenue to fill in gaps in school aid, transit funding and social programs. He has said his proposed spending plan will allow the State to boost funding for local schools, offer free community college, shore up New Jersey Transit bus and rail service and increase payments to the public employee pension system.
Governor Murphy says his budget is “fiscally and morally” balanced, provides “fairness” to all New Jersey taxpayers and allows the State to “invest in our future” to drive economic growth. Republican opponents of his plan to raise taxes by $1.7 billion are comparing it to former Governor Jim Florio’s $2.8 billion in new taxes during HIS first budget, which were widely panned by many residents throughout his single term as Governor.
The budget debate, which will likely continue right up until the deadline to pass a new budget by the end of June, will focus on HOW the new proposed revenue should be generated. Will it be paid by individuals, corporations or a combination of both? The answer to that question will determine how much of an impact the proposed new taxes have on New Jersey franchised automotive retailers.
NJ CAR will keep dealers informed about any developments as the budget debate heats up in the coming weeks.