Trump Praises N.J. Democrats for Blocking Murphy Millionaire Tax

(Bloomberg) -- President Donald Trump praised New Jersey’s lawmakers for blocking Governor Phil Murphy’s proposed millionaire’s tax, saying it would have driven “large numbers of high-end taxpayers out of the state.”

Murphy, a first-term Democrat, signed a $38.7 billion budget on Sunday, avoiding a government shutdown that could have cost him politically. Though the plan boosts funding for pensions, property-tax relief, public schools and New Jersey Transit. the governor lost his fight for a millionaire’s tax with the more-moderate Democrats who control New Jersey’s Senate and Assembly.

As Murphy vows to continue pushing to increase the levy on New Jersey’s richest residents, he has backing from liberal voters, public unions and a national Democratic party agitating for progressive values in the age of Trump. Foes within his own party may have higher-octane fuel: residents’ disgust with some of the highest taxes in the U.S.

Though Murphy hailed the budget as a “victory for the middle class,” he lamented that it lacked his tax on the rich, higher fees for gun permits and charges on opioid manufacturers to fund addiction services.

“While progressive change is taking hold all across our country, Trenton largely remains a holdout,” Murphy, 61, said on Sunday.

In response to Trump’s Twitter post, Murphy said the president “is fighting for millionaires like himself.” Murphy, a former Goldman Sachs Group Inc. senior director, also would have paid the higher tax.

“I’m fighting for New Jersey’s middle class and all those working to get there,” Murphy said.

Party Friction

Democratic leader Steve Sweeney, who has been in the Senate since 2002 and its president since 2010, was a sponsor of the millionaire’s tax that Murphy’s predecessor, Republican Chris Christie, vetoed five times. In recent years he has changed his mind, saying New Jerseyans can’t afford it.

“The legislature and I strongly agree on many essential investments in New Jersey families, and this budget will make those investments,” Murphy said on Sunday. “But we also strongly disagree on who should fund them.”

Murphy has lost his tax battle for two straight years. In 2018, at least, he got lawmakers to bend a little, settling for higher rates on earnings of $5 million or more.

This year, Sweeney and other legislative leaders refused to budge. Instead of meeting with lawmakers to negotiate, Murphy mostly held press conferences to push his proposals.

"This governor, he really doesn’t want to make deals, doesn’t want to be transactional,” said Assembly Minority Leader Jon Bramnick, a Republican from Westfield. “He has his agenda, and it’s really his way or the highway."

Checks, Balances

Though the governor has power to veto items from the budget, he can’t add spending. He struck $48.5 million from lawmakers’ budget and signed an executive order to deposit $400 million into the state’s rainy-day fund. “The need for us to save for tomorrow is more important than ever,” he said.

The governor said he has “deep concerns” about lawmakers’ revenue projections, and is holding $235 million of appropriations in reserve “until savings assumed in this budget materialize, current revenues reliably overperform, or the Legislature authorizes new revenues.”

The Communications Workers of America union, whose state-employee members helped get Murphy elected, made more than 12,000 calls to members of the legislature to support the governor’s budget, including the millionaire’s tax, according to Hetty Rosenstein, its state director. Members also rallied outside the Statehouse.

The union, Rosenstein said, would continue to support Murphy and stand against “unending and vile attacks” from Sweeney, who is advocating for cost savings in new hires’ pensions and benefits.

"Governor Murphy has decided that he will take a difficult path, a path that he believes in," Rosenstein said by telephone. “He is a person with conviction, and he’s operating from conviction as opposed to jaded or crass politics."

Nationally, 51% of Democrats identified as liberal in 2018 -- the first time a majority of the party’s members chose the term and more than double the percentage that did so in 1994, according to Gallup polling. At the two Democratic presidential candidates’ debates last week, contenders tried to score on topics including the economy, pay equity, health insurance, abortion, transgender rights and pharmaceutical-company accountability.

Murphy, who campaigned on such issues, will become chairman of the Democratic Governors Association in January.

©2019 Bloomberg L.P.

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