Phil Murphy's Tax Plan Draws Challenge From N.J. Senate Boss

(Bloomberg) -- New Jersey’s top-ranking state lawmaker told business leaders that higher taxes won’t solve the state’s budget woes, a direct challenge to Governor Phil Murphy’s plan to raise $1.5 billion of revenue to support his progressive agenda.

“We cannot tax our way out of this fiscal crisis,” Senate President Steve Sweeney, 58, a Democrat from West Deptford, said at a New Jersey Business and Industry Association and New Jersey Chamber of Commerce meeting in Monroe.

Murphy, 60, a fellow Democrat who took office in January, has pitched a $37.4 billion budget that depends on legislative approval of new or expanded taxes on retail sales, millionaires, yet-to-be legalized marijuana, electronic cigarettes, corporations and such services as Uber and Airbnb. He and the Democratic-controlled legislature must agree on a spending plan by the July 1 start of the fiscal year.

Sweeney, in the Senate since 2002, was a sponsor of a millionaire’s tax that Chris Christie, Murphy’s Republican predecessor, vetoed five times. In recent months, Sweeney has said New Jerseyans can’t bear higher taxes in light of President Donald Trump’s federal tax overhaul that limited state and local deductions to $10,000. The lower threshold means a greater burden for high-cost states like New Jersey.

Murphy, a multimillionaire retired Goldman Sachs Group Inc. senior director and first-time elective office-holder, campaigned on making New Jersey a leader on progressive social policy and fiscal responsibility. New Jersey has the highest property taxes and the least-funded public pension among U.S. state governments.

The governor “looks forward to working with the legislature” on higher funding for New Jersey Transit and education, and the largest pension contribution in state history, Dan Bryan, a Murphy spokesman, said in an email.

“While budget discussions remain ongoing, Governor Murphy is confident that those discussions will end with a budget that sets the state on the path toward becoming stronger and fairer for all residents,” Bryan said.

The new governor has pledged to legalize and tax recreational marijuana, fund pre-kindergarten and make community college tuition-free. Though that agenda would make him a progressive force nationally, it depends on Sweeney’s delivering lawmaker votes. Sweeney favors higher levies on corporations making more than $1 million annually, for more than $650 million for the state budget.

“The problems we face -- from pensions to school funding, from health-care costs to property taxes -- are deep-rooted and complex, and the solutions are politically difficult,” Sweeney told the business leaders, according to prepared remarks. “But I promise you that we will have the political will on a bipartisan basis to make the changes we need to make New Jersey competitive and affordable.”

To contact the reporter on this story: Elise Young in Trenton at eyoung30@bloomberg.net.

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, Stacie Sherman

©2018 Bloomberg L.P.