Almost everyone agrees that NJ is facing a budget crisis. Next month Governor Murphy will present his Budget Address. He must go strong on offense.
To continue to balance the budget and move his progressive agenda forward the governor has good reason to adopt a full-throated approach. Stated bluntly: soak the rich. Income inequality in our state ranks 12th highest in the nation. The middle class already feels its taxes are too high and the working poor are struggling.
Nationally Rep. Alexandria Ocasio-Cortez call for a 70% top income tax rate. Senator Bernie Sanders, introduced a bill to raise taxes on dynastic heirs. Senator Elizabeth Warren proposed a levy that has never existed in the United States: a wealth tax, assessed annually on America’s biggest fortunes.
For Gov. Murphy it won’t be easy. Senate President Sweeney insists on “No new taxes.” Assembly Speaker Coughlin, whose assembly members face election in November, takes a similar stance.
In 2017 Murphy decisively won the governor’s race with 56% of the vote, and had every right to promote his progressive agenda. In his 2018 Budget Address he stated, “Here is our inescapable reality — we need this revenue to get things right.” It was not to be. With the three men in the room stalling and sqabbling, the budget was passed on time but it was largely on the Legislature’s terms.
In his budget address next month our governor must proceed with strength, confident that his agenda is important for New Jersey. He might help himself through better communications with legislative leaders and making sure that his policies are perceived as benefiting the middle class, as discussed here.
HOW TO SOAK THE RICH
- NJ Income Tax: The current rate ranges from 1.4%, to 10.75% on income over $5 million. The 10.75% rate can be altered to income over $1 million as Murphy originally wanted. NJPP points out, “This 10.75 rate would not be an outlier compared to the income tax bracket in other states, and it would help balance the regressive nature of New Jersey’s tax code.”
- NJ Estate Tax: For decedents who died on or after January 1, 2018, there is no tax imposed on their estates. The estate tax should be reinstated.
- NJ Inheritance Tax: Currently it starts at 11% and goes up to 16%. Its upper level, affecting the wealthy, should be increased.
- SALT: NJ’s federal legislators and the governor should lobby hard with Congress and the President to end this measure which is an unfair financial tax burden on our state.
- Sales Tax: Although this tax is regressive there would be little noticeable impact to residents by increasing it from 6.625% back to 7% where it used to be. Also a 10% tax could be levied on luxury items like yachts and art costing over $1 million.
As result will some millionaires flee New Jersey? Yes. The main reason some have been leaving recently is SALT, which we must undo. The millionaire tax flight, however, is a myth. The majority of rigorous studies on the subject have found a negligible correlation between state taxes and interstate moves.
The biggest obstacle is the bully in the Senate. The governor has to present a clear and compelling case to the public and aggressively seek the monies needed for investments in our future. Damn the torpedoes, full speed ahead! And if he does use a torpedo and it lands in LD 3 so be it.
Preview illustration by Jonathan Bartlett (NY Times)