Phil Murphy is optimistic about New Jersey’s future except for one major problem — the impact of Washington D.C. lawmakers on the taxpayers of the state. That was the Gov.-elect’s message to local government officials who gathered yesterday for their annual conference in Atlantic City.
One of the Washington GOP proposals would take away or scale back a federal write-off that’s cherished by New Jersey residents since it helps to offset the state’s high tax burden. That proposal threatens to hit thousands of New Jersey homeowners with a tax hike, and undermine Murphy’s plans to rewrite state economic policies before he even takes office. Local officials are also concerned that a loss of some or all of the write-off will lead to a reduction of home values across the state, something that would likely put a new strain on municipal budgets.
“This is not Democrat or Republican. Both parties have to stand together to protect New Jersey residents from being singled out for a federal tax increase,” Murphy said, drawing extended applause as he delivered the keynote address at the New Jersey State League of Municipalities’ yearly conference yesterday.
He delivered the speech just as members of the Republican-controlled U.S. House of Representatives were getting ready to pass sweeping tax legislation that significantly cuts taxes for corporations and those with wealthy estates while also reducing taxes slightly for many in the middle class. Ultimately, all but one member of the state’s congressional delegation, Rep. Tom MacArthur (R-3rd), voted against the bill even as it passed by a 227-205 margin.
Murphy still optimistic about NJ’s future
Earlier, Murphy said he remains just as optimistic about the state’s future as he was during the campaign, and he rattled off several issues that he said he’s counting on the local officials to help him take on, including righting the state economy and fixing its beleaguered mass-transit system.
“All of us, mayors, legislators, Democrats and Republicans, must commit ourselves to reversing the decline of the quality of our life, to restoring basic economic fairness, and to re-establishing people’s confidence that government can, will and has their back,” Murphy said.
“We need your ideas, your talents, we need you to put your skin in the game, as you do every day in your communities, to help us,” he went on to say.
Murphy, a retired Goldman Sachs executive and U.S. ambassador to Germany under former President Barack Obama, has never held elected office before, but he easily bested Republican Kim Guadagno, Gov. Chris Christie’s longtime lieutenant governor, in the gubernatorial election held last week.
A key campaign message Murphy repeated in the run-up to Election Day was centered on the state economy, and a need to generate more growth and equity. Part of Murphy’s economic platform includes the call for a higher rate to be levied on the earnings of those who make more than $1 million annually in New Jersey, a change that he believes will generate more tax revenue that can be used to reverse education-funding cuts enacted by Christie during his tenure. Murphy has also argued that more robust education funding will also help to address the state’s high property-tax burden since school taxes typically make up a large portion of an individual homeowner’s tax bill.
Changes to SALT threaten incoming governor’s platform
But the proposed scaling back of the state and local tax, or SALT, deduction that’s under consideration in Washington threatens to undercut Murphy’s economic platform before he even has the chance to enact it.
To help pay for the significant tax cuts proposed for corporations and those with wealthy estates, the Republican federal-tax proposals call for changing or eliminating a number of personal income-tax deductions, including property taxes. More than 40 percent of New Jersey taxpayers claim the deduction, and by some estimates, the average tax increase for those who stand to lose the write-off altogether would be $3,522.
Under the House bill that was passed yesterday, a write-off for property tax bills would be preserved for up to $10,000. But the current Senate version of the tax bill completely eliminates the SALT deduction. The local government officials fear those proposed changes would cause home values to drop across the state as some people would be discouraged from buying homes if they couldn’t write off their full property-tax bills. And when home values drop, the property taxes levied against them to support local services also bring in less revenue.
Speaking to the local leaders yesterday, Murphy said they can’t allow GOP leaders and President Donald Trump in Washington to undercut his plans to provide tax relief. “When we provide real property tax relief for the middle class and seniors by funding public education and growing the economy, we can’t let Washington take that away,” he said.
Michael Darcy, the executive director of the League of Municipalities, said he was pleased to hear Murphy address the issue. “His sensitivity to the impact that the tax legislation being proposed in Washington would have on New Jersey residents was very important,” Darcy said.
‘We cannot compromise’
“New Jersey has been at the losing end of this legislation from the beginning, and we cannot compromise on that, so we’ll need our governor-elect, soon-to-be-governor, to get involved,” Darcy went on to say.
Michele Siekerka, president and chief executive of the New Jersey Business & Industry Association, also attended the speech, and she said state policymakers “need to step back and be cautious” as they now discuss any potential changes to New Jersey’s tax structure. “Let me be clear, we should step back and be cautious about talking about any tax increase in the state of New Jersey,” she said.
Senate President Steve Sweeney (D-Gloucester) suggested he too is mindful of how the proposed federal tax-policy changes could impact New Jersey residents, and influence the agenda in Trenton.
“If they accomplish what they’re talking about in Washington it’s going to have a devastating effect on the state,” Sweeney said after Murphy’s speech. “It’s going to have an enormous financial impact. Property values are going to go down, foreclosures are going to go up, it’s just going to really have a staggering effect on New Jersey,” said Sweeney, who added that enacting a millionaire’s tax in New Jersey is still a policy goal he shares with Murphy.