Gov. Murphy: More Taxes, Funds Needed In NJ Budget Amid COVID-19

NEW JERSEY – Gov. Phil Murphy provided a revised New Jersey budget on Tuesday, calling for more taxes and revenues to offset the impact of the coronavirus pandemic (you can watch it here, below).

Murphy, addressing lawmakers at Rutgers University's football stadium, once again called for a tax on those earning more than $1 million a year, but he also called for smaller taxes and fees on handgun permits and cigarettes (see list of tax proposals below).

The governor called on each state department to dig for spending cuts and "yes, they will hurt." Murphy will also seek to borrow up to $4 billion, according to budget documents released by the state Treasury.

The borrowing will help address the massive economic fallout created by COVID-19 and better position the state to weather any future public health and economic uncertainties, Murphy said.

"Building a stronger New Jersey requires us to ask those who, in some cases, continued to prosper as this pandemic raged around us – and most certainly were hurt less – to do more so we can strengthen the middle-class families who are the backbone of our state," he said in his prepared remarks.

"That means that the wealthiest among us – millionaires and large corporations – need to pay their fair share in taxes, whether it be on income or in buying a yacht."

The address came as 346 new coronavirus cases and five more deaths were reported on Tuesday. Read more: NJ Coronavirus, School Reopen Updates: Here's What You Need To Know

Murphy also released revised state aid figures for schools on Wednesday amid the coronavirus crisis. Read more: Gov. Murphy Releases New NJ State Aid Figures For Schools

Lawmakers and business leaders have taken Murphy to task for driving down revenues by not reopening more of the state, particularly gyms and indoor dining. Many restaurants took a bath on finances after Murphy moved forward with, then rescinded plans to reopen indoor dining in early July.

Murphy, however, says he's letting health experts – not the business community – determine when it's safe to reopen, repeatedly saying: "Data determines dates."

Instead, he's pointed fingers at Washington DC and Congress for failing to pass another stimulus package along with unemployment assistance extensions.

"We're going to be digging out from this for a while," he said. "Anybody who thinks you can have 1.4 million people who are unemployed and flip a light switch and get back to normal is not paying attention."

But Republicans still blasted Murphy's budget, saying it doesn't do enough to help the small businesses that have been devastated by the coronavirus shutdown.

“With the state credit card in his pocket, Governor Murphy’s budget plan shows none of the fiscal restraint that virtually every family and small business has been forced to exercise due to the coronavirus," said Sen. Declan O’Scanlon, R-Monmouth.

"He wants to borrow billions, which will compound to billions more in interest and fees, to support a budget that demonstrates not one shred of creative cost-cutting reform," he said. "Generations of taxpayers will be saddled with this burden. In the end, this budget is little changed from what he proposed spending before COVID hit when state revenues were still growing.

"Today, however, it just seems tone deaf to propose spending so much when the people of New Jersey are struggling to pay their bills.”

Murphy said decreased revenue collections left the state facing a $5.7 billion shortfall over what was projected during the governor’s budget message in February.

The governor is proposing tax policy changes over a nine-month fiscal year period. The tax policy proposals total $1.019 billion, including $863.1 million in increased revenues and $155.6 million in reduced appropriations for that period.

The tax changes are:

• Expanded millionaires tax: The 10.75 percent marginal tax rate currently imposed on income over $5 million would be imposed starting at $1 million in taxable income. Effective beginning in Tax Year 2020, this proposal is expected to raise $390 million in FY 2021, officials said.
• Increase the cigarette tax to $4.35 per pack: This tax would yield an estimated $143.1 million for eight months of FY 2021. New Jersey’s tax rate would match that of neighboring New York and Connecticut, but would be below the combined state and municipal rate in New York City, officials said.
• Firearms and ammunition taxes and fees: The governor has proposed raising firearm fees, many of which have not been updated since 1966, and implementing excise taxes on firearms and ammunition, The hikes are estimated to raise $6.3 million over an eight month period in FY 2021, officials said.
• Increase HMO assessment to 5.0 percent: This proposal would increase the current annual assessment on net written premiums of HMOs from 3 to 5 percent and raise an estimated $102.7 million in FY 2021.
• State health insurer assessment: The governor signed legislation in July to create the New Jersey Health Insurer Assessment, which sets the rate at 2.5 percent of net written premiums and will support the state’s reinsurance program and state-level subsidies in FY 2021.
• Opioid assessment: This proposal would raise an estimated $15 million in FY 2021 by increasing registration fees and penalties and levying new assessments on opioid drug manufacturers and wholesalers, officials said.
• Restore sales and use tax on limousine services: Currently, these services are not subject to New Jersey sales tax. This proposal would raise an estimated $13 million over eight months of FY 2021.
• Undo the exemption and cap on sales and use tax for new and used boats: Currently, boat sales are provided a 50 percent sales tax exemption and the total tax is capped at $20,000 per sale. The restoration of the full sales tax and elimination of the cap would yield an estimated $7.0 million over eight months of FY 2021.

Murphy was particularly emphatic about the millionaire's tax, saying the state "can alleviate the pain being felt by the millions of middle-class families, and the working poor reaching to lift themselves out of poverty, and secure a better place for them through job-training and workforce development – things that will make our economy stronger and benefit our business community for generations to come."

"And, in particular, in renewing my call for a millionaire’s tax, let’s be honest about who this pandemic has hit the hardest – our middle class and low-income working families – and this tax would not impact them at all," he said.

Murphy noted how much the state's situation has changed since February 25th, when he stood before the Legislature and the people of New Jersey in a crowded Assembly Chamber to lay out his vision for the next state budget.

"There was no social distancing and not a face mask in sight," he said to the small crowd at Rutgers stadium on Tuesday, where people wore masks and were socially distanced. "My, how things have changed."

Murphy noted that the pandemic has infected 190,000 New Jersey residents. "We may, thankfully, no longer be the epicenter of this pandemic in our nation, but we bear the scars for the battle we have put up against it," he said.

Murphy also proposed investing up to $250 million to support schools in opening more fully. He said the money would provide subsidies to child-care centers so that more of them can reopen, and expand direct subsidies to families so more of them can afford child care.

"And, we will maintain the child care tax credit we established in 2018," he said.

The governor’s revised budget also preserves core state programs:

• It does not cut K-12 aid, post-secondary tuition assistance, or operating aid for senior public colleges and universities;
• It restores funding for the Homestead Benefit and Senior Freeze property tax relief programs and does not decrease core municipal aid; and
• It does not impose new burdens on Medicaid recipients or curb the Child and Dependent Care Tax Credit (CDCTC).

The budget includes a new proposal – advanced at the federal level by Sen. Cory Booker and prominent economists – to launch a statewide Baby Bonds initiative, which will provide a $1,000 deposit for the approximately 72,000 babies born in 2021 for families whose income is less than 500 percent of the federal poverty level, or $131,000 for a family of four.

When these residents turn 18, they can withdraw these funds to help them pursue higher education, buy a home, start a business or pursue other wealth-generating activities. This will assist three of four children born in New Jersey, Murphy said.

Also, the budget invests $60 million into the clean water and drinking water programs to ensure safe and modern water infrastructure statewide, and increases the Earned Income Tax Credit (EITC) to 40 percent while proposing to expand its eligibility to assist tens of thousands more young adults, Murphy said

The budget also includes a nearly $4.9 billion contribution to bolster the state pension system, which equals 80 percent of the Actuarially Determined Contribution (ADC) and represents the largest percentage of the ADC contributed in 25 years, Murphy said.

Additionally, it includes a robust $2.2 billion surplus, which represents 5.59 percent of appropriations over the 12-month period.

Watch Murphy here:

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