On Tuesday, September 29th, Gov. Phil Murphy signed into law a $32.7 billion, nine-month budget (NJ S2021 (20R) that includes his long-sought millionaire’s tax and rebates of up to $500 for hundreds of thousands of New Jersey families.
Murphy presented his original budget to the Legislature in late February. Less than two weeks later, the coronavirus pandemic hit New Jersey hard and created a huge hole in the State’s finances. New Jersey’s traditional June 30 budget deadline was pushed back to September 30 in order to get a clearer sense of how the pandemic and ensuing shutdowns impacted the State’s financial situation. In June, Murphy and the Legislature agreed to a $7.7 billion, three-month spending plan that covered July 1 to September 30. This latest, revised budget covers the period from October 1, 2020 through June 30, 2021.
The plan contains a millionaire’s tax, long sought after by Governor Murphy. As a result, the tax rate on income of more than $1 million will increase from 8.97% to 10.75%, matching the tax rate paid on income of more than $5 million. It is expected to raise $390 million.
The budget contains money for rebates of up to $500 for hundreds of thousands of New Jersey families with single-parent incomes less than $75,000, or two-income households less than $150,000.
The budget also increases the annual assessment levied on HMO premiums from 3% to 5%. New Jersey raised that assessment from 2 to 3% last year.
In addition, the budget reinstates a 2.5% surcharge on corporations that will be phased-out in a few years. Moreover, the budget boosts the state’s surplus to more than $2.5 billion and calls for $4.5 billion in borrowing to help close a multibillion-dollar revenue shortfall.
Governor Murphy did not get all of the revenue generating items he wanted. There is no new taxes on cigarettes, no increase in gun fees, no new tax on boat purchases and limo rides. Governor Murphy’s “baby bond” proposal, which would have given tens of thousands of newborns $1,000 bonds, was also not included in the final budget.
Republicans have voiced their displeasure with the budget. They feel the millionaire’s tax is ill-conceived and will result in wealthy residents moving out-of-State. They have also decried some of the spending in the plan, stressing that New Jersey should be practicing fiscal restraint.