Double-checking Murphy’s math: Governor’s claims about tax cuts hold up

JOHN REITMEYER, BUDGET/FINANCE WRITER | JANUARY 24, 2022

NJ Spotlight News

Gov. Phil Murphy delivering his 2022 State of the State address, which was released on Jan. 11

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As a card-carrying progressive, Gov. Phil Murphy is hardly known for being a tax-cutter and instead was frequently portrayed during last year’s gubernatorial election as being dismissive of concerns about high taxes in New Jersey.

But there was Murphy — a Democrat who won reelection in November — going out of his way during last week’s inaugural address to highlight over a dozen individual tax cuts that have been enacted since he took office in early 2018.

Murphy didn’t identify each tax cut individually, but he said his administration has collectively delivered “hundreds of millions of dollars in direct tax relief, for our middle-class and working families and seniors.”

A closer look at the tax cuts by NJ Spotlight News largely confirmed his claims and showed a nuanced strategy. But in a state where arguing over taxes can verge on blood sport, the governor’s cuts have hardly put him in the conservative fiscal camp, as Republicans say far more can be done to provide real relief.

Running the governor’s numbers

The governor’s office provided a list of the tax cuts he’s enacted in cooperation with the Democratic-controlled Legislature to NJ Spotlight News last week, and an analysis indicates his approach has been largely targeted, with priority given to groups ranging from seniors and low- and middle-income parents to college students and low-wage workers.

For example, thousands of seniors and other homeowners who qualify for Homestead property-tax relief benefits are seeing those benefits grow by at least $130 on average thanks to action taken by Murphy. And an additional 90,000 low-wage workers are also now eligible for the state’s expanded earned income-tax credit thanks to the governor.

Republicans say they want to see far more done in the area of tax relief. And they have their own long list of suggestions for Murphy as he sets off on a second and final term in office. Among the GOP’s proposals are more tax relief for businesses and a long-sought adjustment of individual income-tax rates to account for rising inflation.

“If the governor and legislative leadership want to work in a bipartisan fashion, we have a real opportunity to lower the cost of living in the Garden State,” said Senate Minority Leader Steve Oroho (R-Sussex).

To be sure, there have been several high-profile tax hikes enacted since Murphy took office in 2018, on the heels of former Republican Gov. Chris Christie’s two terms in the State House.

The best-known is the higher marginal income-tax rate — the so-called millionaires tax — that was established by Murphy for individuals and households making more than $1 million annually, which the governor frequently brags about as a key policy accomplishment.

A surcharge on the profits of top-earning businesses was also established and extended during Murphy’s first term in office.

Annual spending climbs

These tax-policy changes, and others, have helped support a more than 30% increase in annual spending that’s occurred during Murphy’s tenure as the state has pumped more money into areas like K-12 education aid and public-worker pensions.

But as Murphy’s list indicates, he’s also provided targeted tax relief on several occasions during his tenure, even if the governor himself may have a general reputation for levying higher taxes and increasing spending.

Perhaps partly to blame for that reputation are comments Murphy himself made about taxes several years ago that his GOP challenger Jack Ciattarelli seized on repeatedly during last year’s gubernatorial election. Murphy ultimately prevailed, but the gubernatorial contest was much closer than most observers and public-opinion polling predicted.

Meanwhile, many of the tax cuts Murphy has enacted have come just within the last year, so the taxpayers who are ultimately benefiting from those cuts may not yet be fully aware of them.

Moreover, Murphy has also refrained from enacting the type of attention-grabbing, broad-based tax cuts that were the hallmarks of prior Republican administrations, such as across-the-board sales and income-tax cuts.

Still, his administration has pursued a series of tax cuts that appear to address several key issues New Jersey residents regularly struggle with, including high property taxes and the rising cost of college tuition.

For example, Murphy’s tax record includes the modernization of the Homestead Benefit, as well as an expansion of eligibility for “Senior Freeze” property-tax relief reimbursement. And for all homeowners in New Jersey, regardless of their income, the cap on the state’s income-tax deduction for local property taxes was increased by Murphy from $10,000 to $15,000.

Child-care credit

A state tax credit for child care expenses was also established and expanded by Murphy, and a series of tax breaks were also approved to benefit those saving or paying for college.

For veterans, combat pay was exempted from the state income tax and a general veterans’ income-tax deduction was also doubled. The state income-tax exclusion for retirement income was also expanded during Murphy’s tenure.

And there were other notable tax cuts that have been enacted by Murphy that did not make his administration’s own list. They include the reestablishment and expansion of the state’s digital and film production tax credit and the renewal of a series of tax-incentive programs administered by the state Economic Development Authority.

So far, Murphy has offered few details about where he might go next on taxes, even as he promised in a State of the State address delivered earlier this month that he would continue to pursue policies that will make New Jersey “more affordable for everyone.”

GOP wish list

For their part, Republicans have not been bashful about saying there’s much more work to be done in the area of tax relief. They’ve also suggested Murphy’s closer-than-expected reelection and GOP gains made in both houses of the Legislature last year indicate voters want to see far more done to address affordability issues.

On Oroho’s list of overdue tax cuts is the establishment of a new state income-tax write-off for donations made to New Jersey charitable organizations that have struggled to keep up with the ongoing coronavirus pandemic.

The GOP Senate leader would also like to see the administration do more to help businesses manage payroll-tax hikes that are required to help replenish the balance of the state’s unemployment trust fund. The fund was depleted during the economic downturn triggered during the first months of the health crisis.

Also on Oroho’s wish list is taking a more aggressive posture with New York, which has continuously taxed income earned by New Jersey residents who have been working from home during the pandemic for companies based in New York.

Soaring inflation has also prompted Sen. Anthony Bucco (R-Morris) to renew his call for state income-tax rates to be “indexed” to ensure residents don’t end up paying more in taxes at the same time inflation has eroded their take-home pay, something commonly referred to as “bracket creep.”

Meanwhile, Sen. Michael Testa (R-Cumberland) has taken issue with how Murphy has claimed to improve overall affordability during his recent high-profile speeches. Testa pointed to a new series of toll hikes that went into effect just a few weeks ago that were ultimately authorized by Murphy but not mentioned at all during his speeches.

“New Jersey residents deserve better. If Murphy is going to reach for the taxpayer wallet, he should be honest enough to come out and say it,” Testa said.

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published this page in News and Politics 2022-01-24 04:36:21 -0800