With Murphy’s Budget address tomorrow, three issues seem to be swirling around in the Statehouse. #1 is a difference in opinion as to who should bear the brunt of the needed increase in taxes. #2 is that legislators feel that Murphy is not consulting them on his budget nor showing an effort to be collaborative. #3 is whether he is proposing more tax increases that what the legislators and the public want.
Such disagreements between a Democratic governor and a Democratic legislature are not uncommon. Gov. Jon S. Corzine shut down the state’s government for the first time in its history because of a budget impasse. The legislature did not support his call in such cases as marriage equality, certain corrections reforms, and his probably misdirected plan to privatize and sell off the NJ Turnpike. With the needle exchange program Corzine had to settle for a law that allowed its implementation but without funding to support it.
CORPORATIONS VERSUS MILLONAIRES
A Star-Ledger article explains that Murphy’s address could set in motion a brewing all-Democratic Party fight over just who should pay the bills: corporations or millionaires. Murphy has proposed a millionaire’s tax and Sweeney has countered an alternative corporation tax. Why not implement both? The new federal tax law reduces corporate taxes and provides the wealthy with numerous benefits. Both groups can afford to pay a little extra to New Jersey, while not placing the burden on the struggling middle class.
In December President Trump signed the Tax Cuts and Jobs Act. It cuts the corporate tax rate from 35 percent to 21 percent beginning in 2018 – a huge decrease. Sweeney’s proposal is for an increase in state tax of only 3%. While some corporations are now offering one-time bonuses, particularly to those who are already well paid, CNN reports, Only a small slice of corporate America has shared tax savings with workers so far. In effect there is little “trickle down.’
As WNYC has reported “New Jersey is home to some of the wealthiest people in the country – and some of the poorest. And according to the latest census data, that gap has only gotten wider since the recession.” Business Insider indicates that “from private school tax breaks to bigger inheritances, there are 7 ways rich people win big with the tax law.” The Atlantic chimes in with, “The richest 1 percent now own 40 percent of the country’s wealth. Under this bill, they’d own more.”
The above provides justification to implementing both proposals and serves as a compromise between Murphy and Sweeney with neither plan being rejected. Last week Murphy said, “I don’t see [Sweney’s proposal] as an alternative. Perhaps it’s another weapon at our disposal, and we will give it some more thought.” Indeed, the proposal had already been a recommendation from the Governors Transition Budget Committee. How intractable Sweeney may be in only accepting his own plan is yet to be seen.
MURPHY’S COLLABORATION WITH THE LEGISLATURE
Murphy needs support from the legislature and a collaborative relationship between him and legislative leadership to pass his agenda. Matt Friedman of Politico says, “He has infuriated key Democrats by failing to consult them, or even tell them what’s in his plan.” It’s unnerving,” says Sen. Loretta Weinberg, D-Bergen, “The best way to work out our differences is to have communication, and right now that is not happening between us and the governor. That creates a distance, which leads people spinning stories, which leads to hostility.”
WHEN IS INCREASING TAXES GOING TOO FAR?
Tom Moran says Murphy will almost certainly include more tax hikes and more spending than even Democrats want. Murphy and the legislature recognize that the budget is so strained that an increase in taxes is necessary. The brunt of the proposed increases, however, are focussed only on the wealthy and/or corporations. Nonetheless, New Jerseyans justifiably feel they are being over-taxed, and many want their taxes lowered. In this regard the Legislature is more cautious – for example, those in the Assembly face re-election every two years. Murphy is more expansive and bolder.
Murphy’s interpersonal skills and lack of experience in dealing with a legislature might well be hindering him. However, he is the new guy on the block; whereas, the Democratic legislature has essentially been unchanged in the past recent years. He has inherited a governorship which is probably the most powerful in the nation, he won his post with a large majority, and he has proposed an exciting progressive agenda. The legislature should not rush in so quickly to stifle his taxing proposals. Give him a chance – time to get support from the public and to hit his stride. Remedial action if necessary can always be implement in a succeeding year.
Stay tuned to what Murphy says tomorrow and how the public and the legislature respond.
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