Enacting our new budget, which must be completed by June 30, is currently hampered by lower than expected tax revenue received through March 30, 2019. Gov. Murphy has proposed a new millionaire’s tax on earnings above $1 million. Legislative leaders (Sweeney and Coughlin) are saying, “No new taxes” because such a change could make the state more vulnerable to the next big recession. For Murphy to be able to justify additional spending on his progressive agenda, he not only needs the millionaire tax increase but stronger tax collection.
A Pew Research Report in January indicates that most states entered the 2019 budget year in July with a fourth consecutive quarter of solid gains pushing total state tax collections to 13.4% above the peak recorded in 2008, after adjusting for inflation. However, New Jersey’s tax collections were a minus 1.4%.
Pew continues, “As states regain fiscal ground lost in the recession, policymakers face pressure to catch up on investments and spending postponed because of the downturn. That may be more difficult in states where tax revenue remains below its previous peak.”
Although the projected annual growth rate of our current budget for Total Major Revenue through March is 7.7%, the rate achieved so far is 3% less, at 4.7% – equivalent to $603,835 less than anticipated. The shortfall is primarily in the Gross Income Tax revenue budgeted through March to increase by 3.5%, but instead decreased by 3.9%.
Murphy and Sweeney are in agreement that more money should go toward funding Pre-K. However, Michael Aron in NJ Spotlight writes, Murphy and Sweeney have learned how to look and sound unified, but there’s clearly a lot that divides them – the millionaires tax, pension and benefit reform, and leadership at the Schools Development Authority, to name a few.
As Nicholas Pugliese points out, New Jersey’s finances are stable for now, but a lot is riding on how much money comes in around the income tax deadline. If those tax collections fall short, that could mean spending cuts this year and less money for Gov. Phil Murphy to fund his priorities next year.
For those who want more spending for Gov. Murphy’s agenda, it its incumbent on you to contact your local Senator and Assembly members. All Assembly persons are up for re-election this November. And let’s hope that our tax revenue by the end of May is more in synch with projections.