Senate President Steve Sweeney’s blunt, and accurate, assessment of the outcome of last week’s Assembly elections — “We lost” — contradicted Gov. Phil Murphy’s happy-warrior response that the Democratic Party was actually better off despite losing a Senate seat and two Assembly seats.
What followed Sweeney’s terse reaction, though, was more meaningful: “The problem is when we have an administration that talks only about raising taxes every day, it’s not helpful.”
Translation: Governor, don’t even bother coming to the Legislature in a few months with a budget built on an increase in the state income tax on earnings in excess of $1 million.
It is, of course, not a new position for Sweeney (D-Gloucester); he, after all, sunk the millionaires tax proposal in two consecutive years.
But, by tying tax increases directly to Democratic election losses and, by implication, to Republican successes in retaining Assembly seats thought to be in play, Sweeney warned the governor that he risked the same outcome in 2021 when voters will choose a governor and the 120-member Legislature.
And, Sweeney is not about to allow that to happen.
Issue that’s a proven loser
The lesson is not lost on Democratic legislators either — running on a platform in support of a tax increase, even if it’s on the wealthy, is a proven loser.
Murphy has given every indication that he intends to recommend the tax increase in his fiscal 2020-2021 budget, remaining steadfast in his view that the wealthy are not paying their fair share, and that extracting additional revenue from them will not burden them unduly and will provide the state with funding for a variety of needs.
Sweeney is having none of the governor’s argument and is likely to be joined once again by Assembly Speaker Craig Coughlin in a united front of opposition.
Twice the state was brought to the brink of a shutdown by the tax increase impasse and twice the governor backed down.
Armed with evidence that this year’s election results represented powerful anti-tax sentiment, Sweeney and Coughlin will make it three years in a row.
Sweeney remains convinced that the recommendations in his “Path to Progress” study is a far more potent campaign message — one that would guarantee continued Democratic control of the Legislature — than engaging in an argument over raising taxes on millionaires.
The study relies entirely on the belief that government already receives sufficient tax revenues and that a combination of spending reductions and more effective allocation of resources is essential to restoring fiscal stability.
Revenue problem or spending problem?
It is a more academic version of “government doesn’t have a revenue problem, it has a spending problem.”
Among its many recommendations are dramatic revisions in the public pension and health benefits system, far-reaching consolidations of more than 300 school districts, greater emphasis on cost-sharing among local governments and property-tax reduction schemes.
Public employee groups have stoutly opposed the Sweeney program, characterizing it as a way to disguise its real goal — forcing employees to contribute larger sums to their benefits package.
While admittedly the governor’s millionaires tax proposal impacts but a small slice of the taxpaying public, it provides Republicans with another opportunity to rail against the “tax and spend” tradition of the Democratic Party.
Murphy wrapped his arms around this tradition and, in the process, handed Republicans an incredible campaign gift, when he suggested publicly that individuals or businesses considering moving to New Jersey and whose priority concern is the tax burden, should seek a location elsewhere.
His follow-up attempt to place the remark in context by touting the state’s many benefits in return for the tax dollar, fell flat.
Republican line of attack
Republicans have long accused Democrats of clinging to a policy of tax increases as a first resort while paying lip service only to fiscal austerity and discipline — a habit they say Democrats have been unable or unwilling to break.
The governor and the private interest groups who favor the millionaires tax correctly argue that it enjoys majority support, but the polling on the question implies that only the rich will pay more so the middle class can be spared — a proposition that is viewed skeptically by those who fear that once the pattern of increases is established and becomes entrenched, it will soon spread to the less wealthy.
Murphy’s close political association with public employee unions and his stubborn refusal to consider reforms to their fringe benefits system has helped give traction to the argument that not only will those costs continue to rise, but that taxes to pay for it will rise as well.
In a state whose cost of living consistently ranks near the top in the country and which has seemingly forever ranked first in average property taxes (near $9,000 and considerably higher in many regions), a candidate who seeks office on a pro-tax increase platform does so at his or her peril.
Sweeney believes that he is in a position to mitigate that peril, but that the governor’s insistence on an income tax increase will only exacerbate it.
The situation seems ripe for a compromise, particularly if Murphy seeks a second term. Accommodations are within reach, deals can still be struck, and a truce — even an uneasy one — is possible in the longer-term political interest.
Murphy, though, has in the past dug in his heels on the millionaires tax, relenting only in the face of a potential furious public outcry over a government shutdown.
If history repeats itself and there is a lesson to be learned from it, Sweeney will prevail again.