New budget deal kills Murphy plans to raise N.J. taxes on cigarettes, firearms but hits corporations, millionaires

Posted Sep 21, 2020

New Jersey Gov. Phil Murphy closes his Fiscal Year 2021 budget address at Rutgers University's SHI Stadium. Applauding him are state Assembly Speaker Craig Coughlin (left) and state Senate President Stephen Sweeney (right).

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Gov. Phil Murphy and his fellow Democrats who lead the New Jersey Legislature have agreed on a state budget deal that raises taxes on high-income earners and HMOs while extending a 2.5-percentage point surtax on corporations with over $1 million in income.

The agreement also jettisons Murphy’s other proposed tax increases on sales of cigarettes, firearms, boat sales, limousine rides and a tax on opioid manufacturers, according to two legislative sources who were not authorized to publicly discuss the plan and requested anonymity.

It was still unclear early Monday how much the governor and legislative leaders have agreed to raise through borrowing. Murphy’s proposed budget anticipated taking on a $4 billion, 10-year loan as the state copes with cratering tax revenue in the wake of the coronavirus pandemic.

Murphy declined to comment on the budget at his coronavirus briefing in Trenton on Monday.

Lawmakers expect to take up the bills in budget committees Tuesday and hold a final vote in the full state Senate and Assembly on Thursday. Murphy then has until Sept. 30 — next Wednesday — to either sign the budget or veto it in part of in full.

But the governor and lawmakers do not expect the kind of last-minute drama over the budget that has clouded Murphy’s budget proposals the last two years, when the threat of a state government shutdown hung over negotiations.

The budget committee agendas reflects that the bills will be in committee Tuesday, though they are not yet available for public review. The budget bill is described as appropriating $32.7 billion — about $300 million more than the governor’s proposed spending plan.

Murphy submitted his proposed budget to the state Legislature less than a month ago, followed by limited legislative hearings due to the truncated budget cycle. The new fiscal year begins Oct. 1 and runs for nine months until June 30.

The budget, as proposed, includes $1 billion in tax increases and borrows $4 billion to close a projected revenue shortfall.

A deal announced late last week resolved one piece of the budget negotiations: Murphy’s long-sought millionaires tax. The governor, state Senate President Stephen Sweeney, D-Gloucester, and state Assembly Speaker Craig Coughlin, D-Middlesex, reached an agreement to install a proposal Murphy campaigned on but previously failed to convince lawmakers to adopt. The leaders said the proposal would increase from 8.97% to 10.75% the tax rate on income between $1 million and $5 million in New Jersey.

In exchange, married couples in the state with at least one dependent child and less than $150,000 in gross income and single parents with at least one dependent child and less than $75,000 in gross income will receive a tax rebate of up to $500 next summer.

Murphy’s administration estimated the millionaires tax will generate $390 million for the state and the permanent extension of the corporation business tax increase, $210 million.

The tax on corporate income over $1 million was increased by 2.5 percentage points in a budget deal between Murphy and the Legislature would otherwise be phased out.

A boost in an assessment on HMO plans to 5% would drum up more than $100 million.

Any borrowing plan will also require approval from a special committee of four lawmakers, including Sweeney, Coughlin and the chairs of the Senate and Assembly budget committees.

Politico New Jersey was the first to report about the corporate business tax and the elimination smaller tax proposals.

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published this page in News and Politics 2020-09-22 03:31:37 -0700