Tax Bill Could Derail Promises Made by New Jersey’s Next Governor

Throughout his 17-month campaign, Philip D. Murphy, the governor-elect of New Jersey and a Democrat, made promise after promise to voters: to fully fund the state’s floundering transportation network, fully fund its underfunded schools and to fully fund the underfunded public pension system, all part of a far-reaching progressive agenda that led to a 14-point victory in last month’s election.

Essential to Mr. Murphy’s agenda was a so-called “millionaire’s tax’’ to be levied on the state’s wealthiest residents. After the election, Mr. Murphy and his allies in the Democratic-controlled State Legislature made passing the tax their top priority when he takes office in January.

But now the federal tax bill passed by the Senate, which takes aim at high-tax and Democratic-leaning states like New Jersey, is threatening both House Republicans from New Jersey, who will be pressed to vote on a measure that will harm their constituents, as well as the state’s Democratic agenda.

While Mr. Murphy has remained adamant that state lawmakers press ahead on the tax on the wealthy, Stephen M. Sweeney, the State Senate president, and Craig Coughlin, the incoming Assembly speaker, have both said that they want to reassess the wisdom of pursuing a new tax when so many residents are facing the prospect of far higher tax bills.

“I’ve obviously listened to his comments, and I stand by mine, that we have to be pragmatic,” Mr. Sweeney said, referring to Mr. Murphy. “The assembly speaker and myself and the governor-elect need to figure it out. But we’re not going to rush into anything right now until we know exactly what we’re dealing with.”

New Jersey would be one of the hardest hit states under the Senate’s tax bill, in large part because it eliminates the deduction for state and local income taxes and limits the deduction for property taxes to $10,000. New Jersey ranks fourth among states with the highest average deductions for households earning $200,000 or more, and two of its counties are in the top 12 in the country for the highest average amount claimed in state and local tax deductions.

In a conference call with Gov. Andrew M. Cuomo of New York and Gov. Jerry Brown of California, both Democrats, Mr. Murphy said that more than a quarter of New Jersey residents pay over $10,000 in annual property taxes. The three governors vowed to fight the bill, including possibly filing a lawsuit, though details beyond that were murky.

But it is the direct hit to residents in New Jersey that has made Mr. Coughlin and Mr. Sweeney hesitate.

“What I’ve said about the millionaire’s tax, as I want to do with all of the things we do, I want to have a thorough and thoughtful process about how we go about handling challenging issues, and what happens in Washington might have an impact in New Jersey,” Mr. Coughlin said.

During the campaign, Mr. Murphy estimated that raising taxes on the highest earners would yield about $700 million in revenue that could be used to help fund public schools and provide property tax relief in New Jersey, which has the highest property taxes in the country.

Mr. Murphy believes the political pressure should not fall on him to drop his tax proposal, but on Republican members of Congress in New Jersey who need to work to amend the Senate bill as it is reconciled with the House version before a final vote.

“Each of our states have Republican members in the House,” Mr. Murphy said in his call with the governors. “And I would say this is beyond Republican or Democrat. This is a clear cut question. Are you representing your constituents who elected you, who you claim to represent, or are you in with President Trump’s wrongheaded leadership in Congress?”

Protesters seemed to share Mr. Murphy’s opinion and focused on the state’s five Republican congressman. Dozens of protesters gathered on Monday outside the offices of all the Republican representatives to express their anger at the bill, even though only one Republican, Representative Tom MacArthur, voted for the House version of the tax bill.

The largest protests were at the offices of two Republicans in the northern part of the state — Representatives Leonard Lance and Rodney Frelinghuysen — who voted against the bill, signaling that Republicans, no matter where they stand, will be tied to the tax plan in next year’s elections.

“The G.O.P. owns this bill, they absolutely own it,” said Winn Khuong, the executive director of Action Together New Jersey, a progressive activist group. “We want all of our Republican United States representatives to represent New Jersey. So we want to put pressure on them. We know if the bill goes into conference, things are going to change.”

On Tuesday, Mr. Lance teamed up with Representative Josh Gottheimer, a Democrat from northern New Jersey, to announce a proposal to save the state and local tax deduction, known as SALT.

“We’re trying to preserve, in its entirety, SALT,” Mr. Lance said, adding that he and Mr. Gottheimer’s proposal includes suggestions about how to offset the cost of preserving the deductions. “It’s not that we’re simply saying add this back, without attempting at least in some way we have to identify areas where we want to make sure we are fiscally responsible.”

Mr. Lance, who represents a wealthy, suburban district in northern New Jersey, also said he was not worried about whether the tax bill could harm his re-election chances.

“I have a very sophisticated highly educated district and I will be judged on my voting record,” Mr. Lance said. “Any attempt to suggest that I have voted differently from the way I have voted is bound to fail.”

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