N.J.’s Revenue Surprise Deepens Divide Over Millionaire’s Tax
(Bloomberg) -- New Jersey’s budget discord deepened as a key blocker of Governor Phil Murphy’s proposed millionaire’s tax also disagreed with his fellow Democrat’s plans for a record April revenue surge.
The administration on Tuesday boosted current-year revenue forecasts by $377 million after April income-tax collections surpassed a 2008 record. Murphy, a retired Goldman Sachs Group Inc. senior director, says he’ll use some of the cash to replenish a rainy-day account that’s stood empty for more than a decade, a factor that contributed to a string of downgrades under Chris Christie, his Republican predecessor.
In a phone interview on Tuesday, though, State Senate President Steve Sweeney said Murphy was making a misguided choice “in order for Wall Street to look at us and say we’re healthy.” The state has more urgent funding needs, he said.
“A rainy day fund is when you have everything funded and everything’s fine -- but it’s not in New Jersey,” Sweeney told reporters Wednesday in Trenton. He pointed to higher education, programs for the disabled and New Jersey Transit commuter bus and rail as spending priorities.
New Jersey is among the states, including California, Connecticut and Illinois, where April revenue beat expectations, making up for shortfalls earlier in the budget year. Projections had been tough because of uncertainty over how U.S. tax changes, including the $10,000 cap on state and local deductions, would affect collections.
But just six weeks before the deadline to pass Murphy’s proposed $38.6 billion spending plan, New Jersey’s good revenue figures were muddled by squabbling among the Democrats, who control both legislative houses and the governor’s office. On Tuesday, Senator Paul Sarlo, chairman of the budget committee, said legislative leaders were “not going to move forward” on the millionaire’s tax, a centerpiece of Murphy’s middle-class “fairness” agenda.
Last week, Senate Majority Leader Loretta Weinberg, another Democrat, criticized Murphy’s decision to give just $25 million more to NJ Transit, which has been beleaguered by accidents and breakdowns and is approaching three months of schedule changes that will inconvenience an estimated 5,000 riders a day while Amtrak performs maintenance at Pennsylvania Station in Manhattan.
“Transit advocates estimate NJ Transit needs at least $75 million more just to cover increased costs and to avoid running a deficit going into next year,” Weinberg said in a May 9 statement. “That doesn’t even include the fact that we want NJ Transit to provide better service -- not more of the same.”
Murphy, who took office in January 2018, narrowly averted a government shutdown when he and lawmakers last year agreed to scrap a proposed sales-tax increase. They also agreed to charge higher taxes on those making in excess of $5 million, rather than $1 million, and increased the corporate business tax over four years.
Murphy has said he would put $250 million toward homeowner relief from the nation’s highest property taxes -- but only if lawmakers agree to tax millionaires more. He said he had no intention of abandoning the effort.
“I’m trying to set this state up for the long haul, something that we haven’t been very good at historically,” Murphy told reporters in East Windsor. He also said that state law required excess funds to be deposited to the rainy-day account.
©2019 Bloomberg L.P.