More than 2 million New Jersey residents would each get another $125 in property-tax relief next year under a proposal Gov. Phil Murphy detailed for the first time yesterday. But whether the Legislature ends up going along with his plan remains to be seen. Indeed, it may not even be considered.
Speaking at a morning news conference in Hackensack, Murphy said he’s pushing lawmakers to adopt legislation that would increase state spending on direct property-tax relief by $250 million.
The extra funding would let his administration establish a new income-tax credit to help offset property taxes paid by homeowners and renters who make up to $250,000 annually, Murphy said.
“Our middle class deserves tax fairness,” he said. “They need middle-class property-tax relief.”
Several local mayors backed the governor’s call for enhanced property-tax relief yesterday, which came just weeks before the budget is due to be enacted in Trenton. This year, all 80 seats in the state Assembly are up for grabs, adding to the political calculations surrounding budget talks.
Yet the governor’s property-tax relief plan is likely already dead on arrival in the Democratic-controlled Legislature, thanks to its ties to a Murphy-backed millionaires tax proposal that has faced major pushback from top lawmakers this year. In fact, unless rank-and-file members break with their tax-weary legislative leadership and force a reversal, Murphy’s tax proposals may not even make it to the floor of either house before the new state budget is due to be enacted by the end of the month.
While the rate of growth has slowed in recent years, property taxes remain on the rise in New Jersey and continue to be a top concern for voters. For example, the average New Jersey property-tax bill increased by $77 last year to a record high of, according to data compiled by the Department of Community Affairs.
Murphy’s original budget plan for fiscal year 2020, which begins July 1, offered little in terms of additional property-tax relief, and spending on some direct state-relief programs like Homestead and Senior Freeze was projected to decline based on participation trends. But Murphy reversed course last month when hethe state could spend another $250 million on direct property-tax relief in fiscal 2020 if lawmakers agreed to raise the income-tax rate on earnings over $1 million.
The $250 million in new spending would be divvied out in the form of a refundable income-tax credit that would be made available to New Jersey homeowners and renters with annual earnings between $10,000 and $250,000 when they file their income taxes with the state next year, Murphy said yesterday. Unlike tax credits that simply lower a taxpayer’s gross income, the new credit worth $125 would be collected in full as a tax refund, or if money is owed to the state, would reduce a taxpayer’s bill by $125.
The $250,000 income cap proposed by Murphy is significantly higher than those in place for other popular property-tax relief programs, and the Department of Treasury estimates more than 2 million New Jersey residents could qualify for it. Allowing renters to receive a credit also marks a change from programs like Homestead and Senior Freeze that only cater to homeowners.
But Murphy said it’s all contingent on lawmakers going along with his millionaires tax proposal.
“This direct property-tax relief simply cannot happen unless we find the courage to ask the wealthiest among us to pay their fair share,” Murphy said.
Right now, the state income-tax rate for earnings between $500,000 and $5 million is 8.97 percent. Murphy is proposing to apply a top-end rate of 10.75 percent that’s currently levied on earnings over $5 million to earnings over $1 million. The tax-policy change would generate an estimated $536 million in new revenue if enacted by lawmakers.
Murphy has argued that recent public-opinion polls show the millionaires tax is popular with New Jersey voters, and enacting it was also a core promise of his successful campaign in 2017.
“The governor is a man whose rhetoric and values line up with his actions,” said Teaneck Mayor Mohammed Hameeduddin, who was among the local officials standing alongside Murphy yesterday as he made the case for increasing taxes on millionaires.
“There is a groundswell going on right now, and if the Legislature does not act then they don’t understand that the power of the people is stronger than the power of the people in power,” Hameeduddin said.
But Senate President Steve Sweeney (D-Gloucester) is among the powerful lawmakers who’ve been dug in against the millionaires tax this year, including after Treasury’s latest revenueindicated the tax outlook for fiscal 2020 had improved even without hiking any taxes. Sweeney has countered by pitching a series of that would seek to lower government spending, including by changing benefits for public workers. He remained unmoved on the millionaires tax yesterday in the wake of Murphy’s announcement.
“We need to face up to the financial challenges that have been ignored for too long and take the actions that will go beyond political rhetoric and deliver real savings for all homeowners and renters that will last year after year,” Sweeney said.
Liza Acevedo, a spokeswoman for Assembly Speaker Craig Coughlin, responded by saying the speaker also doesn’t believe a millionaires tax will be needed to balance the fiscal 2020 budget.
“Speaker Coughlin encourages Gov. Murphy to keep an open mind regarding signing a fiscally sound budget, excluding a millionaires tax,” Acevedo said.
Meanwhile, Sen. Declan O’Scanlon, a Republican who serves on the Budget and Appropriations Committee, suggested Murphy’s millionaires tax proposal could end up making state revenues more volatile by connecting even more spending to just one tax source. The income tax is already the state’s largest source of revenue, with much of that coming from high earners.
“Increasing taxes on anyone in New Jersey is awful policy, no matter who you’re trying to bribe otherwise,” O’Scanlon said in an interview yesterday.
Murphy was asked about the opposition to his proposal in the Legislature during his event in Hackensack, and the governor responded by saying he was “born an optimist.” He also said he is talking to lawmakers “morning, noon and night” to make the case for his budget proposals.
“We’ll see how the next few weeks play out,” he said.