N.J.’s Governor Pushes ‘Millionaire’s Tax’ as His Party Tilts Left

By Nick Corasaniti


March 5, 2019

Gov. Philip D. Murphy wants to raise the income tax on those making more than $1 million, but some Democrats have said they will not embrace new taxes without significant reforms in spending.


TRENTON — Gov. Philip D. Murphy of New Jersey, a Democrat who won a decisive victory two years ago by promoting a progressive agenda, wants to raise the income tax on those making more than $1 million to help pay for what he says are some of the state’s most pressing needs, including expanding preschool and making higher education more affordable.

His proposal, unveiled on Tuesday, is similar to the plan he pursued last year, which set off a confrontation with the Democratic-controlled Legislature that nearly shut down the state’s government and led Mr. Murphy to accept a compromise that raised taxes on a smaller pool of the wealthy.

But now the national conversation is much different: Progressive Democrats, including several candidates for president, have shifted the party to the left, arguing that taxing the wealthy will not only address growing income inequality, but will help pay for expansive social programs like Medicare for all that are priorities for the party’s more liberal wing.

Senator Elizabeth Warren of Massachusetts has proposed an “ultramillionaire’s tax” that would impose a 2 percent tax on a household’s assets over $50 million, and an additional 1 percent on those exceeding $1 billion. Senator Cory Booker of New Jersey has called for imposing a surtax on estates greater than $10 million.

And Representative Alexandria Ocasio-Cortez, the progressive congresswoman from New York, has promoted a 70 percent tax on income exceeding $10 million.

“The debate over income inequality is at the core of the Democratic Party, more so now than ever,” said Stephanie Cutter, who was the deputy campaign manager for former President Barack Obama in 2012. “The solutions to deal with that are broad, but at the end of the day, it comes down to making investments in the middle class, and those trying to get there, by raising taxes on those at the very top.”

Yet in New Jersey, despite Mr. Murphy’s liberal agenda and the decidedly Democratic tilt among the electorate, there has been strident opposition to any new taxes, even among members of the governor’s own party.

The two Democratic legislative leaders, Stephen M. Sweeney, the Senate president, and Craig J. Coughlin, the Assembly speaker, have been adamant that they will not embrace new taxes without significant reforms in spending.

The looming showdown reflects the difficulty in turning campaign idealism into policy, particularly in a tax-weary state like New Jersey.

“Those at the very top are shouldering less and less of their fair share of the tax burden,” Mr. Murphy said on Tuesday in a speech detailing his budget. “That’s the opposite of tax fairness. Let’s work together to apply the millionaire’s tax to every millionaire. By doing so, we can do more to relieve the burden on middle-class taxpayers and senior citizens who are taking it on the chin from the Trump administration’s tax scam.”

A Rutgers University poll just after Mr. Murphy’s election in 2017 found that nearly two-thirds of state residents favored a tax on those making over $1 million. But that was before the fallout from President Trump’s federal tax law hit the state, most significantly by limiting the deductibility of state and local taxes.

Only three states in the country, as well as Washington, D.C., have taxes that target those making more than $1 million: California, Connecticut and New York, which adopted a so-called millionaire’s tax during the recession a decade ago.

New York Mayor Bill de Blasio favors raising the tax, but Gov. Andrew M. Cuomo has said that it would have virtually no chance of passing in the Legislature.

Mr. Murphy had hoped to build on the momentum of his 14-point victory in 2017 and the Rutgers poll results when he called on raising taxes on the wealthy last year. But after opposition from Democratic legislators brought New Jersey to within hours of a government shutdown, a compromise was reached to raise taxes on those making over $5 million.

That tax raised $216 million last year, according to the state’s Department of Treasury. This year, Mr. Murphy said, expanding the tax to those making more than $1 million would bring in $447 million in new revenue, helping pay for priorities like improving New Jersey Transit, the state’s sputtering public transportation network, and paying down the state’s enormous public pension obligations.

But with the 80-member Assembly up for election this year, many Democratic lawmakers are wary of angering voters by pursuing yet another tax. Only a dozen or so applauded when Mr. Murphy mentioned the millionaire’s tax.

“I remain convinced that we can achieve additional substantial savings through reforms and other governmental efficiencies and not rely on a broad-based tax,” Mr. Coughlin said.

“We’ll talk about taxes when we think we’re at the right place,” Mr. Sweeney said. “But right now there’s more to do.”

But progressive activists in New Jersey are vowing to make the millionaire’s tax a campaign issue this fall.

“I think that any legislator who is running on taxing the rich will energize their base,” said Robert Duffey, the interim executive director of the Working Families Party’s New Jersey affiliate, a progressive group. “Any legislator who would rather carry water for millionaires than working families will run into real trouble around election time.”

Mr. Sweeney, who had initially supported a millionaire’s tax before reversing course, has been adamant that he will not agree to new taxes without significant changes to spending — such as reducing public worker benefits far more than Mr. Murphy is proposing and consolidating municipal police and fire departments and school districts.

Mr. Murphy did propose $1.1 billion in savings in his $38.6 billion spending plan, largely from renegotiating benefits with public employee unions and streamlining his administration, though the governor’s proposal differed from Mr. Sweeney’s plan.

The governor also promised to invest in New Jersey Transit “if it kills me,” and said that if his budget is approved riders would not face a fare increase this year.

He also said that legalizing recreational marijuana was “an unfinished item from last year’s to-do list,” but added that negotiations with the legislature were “closer than ever.”

Still, Mr. Murphy seemed to acknowledge the uphill battle ahead with the Legislature, especially over the millionaire’s tax.

“We can compromise on policy without compromising either our principles or our commitment to our people,” Mr. Murphy said. “I understand the budget I am proposing today will not be identical to the one I will ultimately sign. We will talk, we will negotiate and we will compromise.”

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