(Bloomberg) -- New Jersey Governor Phil Murphy enacted a $37.4 billion spending plan that will fund his progressive agenda by raising taxes on large corporations and individuals making more than $5 million.
The 60-year-old Democrat signed the budget on Sunday shortly before midnight, 24 hours past a constitutional deadline. An agreement with fellow Democrats who dominate the Senate and Assembly that was forged a day earlier -- and followed by a flurry of bill writing, amendments and legislative voting in Trenton -- staved off a government shutdown.
It was the first budget for Murphy, a retired Goldman Sachs Group Inc. senior director who had campaigned on higher taxes for the wealthiest in order to fund investments in education, transportation and health care. He met resistance from lawmakers concerned about voter backlash in one of the highest-taxed states in the nation.
“This deal implements almost all of the investments in New Jersey’s future that I recommended to the legislature in March,” Murphy wrote in a statement to the Senate. The budget includes a record $3.2 billion payment to the least-funded public pension among U.S. state governments.
Murphy, who took office in January, had planned on more than $1.5 billion in revenue from new or increased taxes. His predecessor, Republican Chris Christie, mostly had resisted higher taxes during his two terms.
Accompanying legislation Murphy signed raised the income tax rate to 10.75 percent from 8.97 percent for those earning $5 million or more. The rate, and to whom it applies, was a chief sticking point during a week of negotiations, as Murphy had wanted a higher levy on those with incomes exceeding $1 million. Senate President Steve Sweeney insisted that such a move would prompt the wealthy to leave New Jersey.
The budget includes a four-year increase in the corporate business tax, a Sweeney priority that will capture some of the billions of dollars companies saved under President Donald Trump’s federal tax changes. Businesses with net income of at least $1 million will pay 2.5 percent extra in 2018 and 2019, and 1.5 percent more in 2020 and 2021.
Left out of the agreement was a sales-tax increase Murphy had proposed. To further fund his agenda, the governor enacted a 50-cent charge on rides by such services as Uber Technologies Inc.; a sales tax on rentals by Airbnb Inc. and similar companies; a tax on sales of liquid nicotine used in electronic cigarettes; and a 90-day tax-amnesty period for individuals who are behind on their bills.
The governor also boosted the state income-tax deduction for property taxes to $15,000 from $10,000 and increased funding for homestead property-tax credits.
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