Legislature introduces budget without millionaire’s tax as deadline draws near

For the second year in a row, New Jersey’s Democratic leaders challenged Democratic Gov. Murphy with their own state budget proposal, introducing a $38.7 billion spending plan that, as threatened, does not include the millionaire’s tax that Murphy made a cornerstone of his own $38.6 billion budget.

“The state needs to be fixed before you have any conversation about raising taxes. And the governor’s refusal to address some of the biggest problems that exist here is just not acceptable. All in all, our budget’s not that far off from the budget that he presented,” said Senate President Steve Sweeney.

The Democrats’ FY 2020 budget — approved by both Assembly and Senate Committees Monday — avoids a millionaire’s tax in part by gleaning $370 million in unspent money from balance carryovers, called lapses, in state government accounts. And it maintains most of Gov. Murphy’s spending initiatives, including funding for pensions, Earned Income Tax Credit and K-12 schools. It leaves a $1.4 billion surplus, but no “rainy day” fund.

“The largest surplus we’ve had in years — over a decade. Largest surplus,” said Sen. Paul Sarlo.

“It fully funds our commitment to the pension and all the state workers, as well as government workers throughout the state. It protects their health benefits. It has more money in it for property tax relief,” said Assembly Majority Leader Lou Greenwald.

Budget details include, as mentioned, no millionaire’s tax expansion, or tax hikes for gun owners and opioid manufacturers. It offers $173 million in new property tax relief, which includes increased spending for extraordinary special education ($50 million); the so-called “Senior Freeze” ($18 million); and a veterans’ tax deduction ($23 million) — $50 million more than Murphy appropriated for NJ Transit — and more money for pre-K and higher education. It raises taxes on HMOs.

“What’s in this bill are many Democrat priorities. Again, we think it’s a good bill. You know, NJ Transit needs more money. They’re going to continue to need more money year in and year out,” Sweeney said.

The governor’s insistence on a millionaire’s tax expansion — in the face of intransigent legislative opposition — has left Murphy with few options. He’s attempted to mobilize public opinion via ads from an affiliated political group called New Direction New Jersey, which debuted a new one Monday.

The governor responded with a statement late in the day, saying, “… the budget introduced today falls short on the principle of tax fairness. It leaves us without the stable and sustainable revenues to secure the investments we seek to make in our people and our state. It makes unnecessary cuts to valuable programs while increasing spending on non-vital ones and eliminates our first deposit in a decade into the state’s empty Rainy Day Fund, leaving New Jerseyans less prepared for an economic downtown. So, at this point, as I have stated again and again, every option is on the table. I will continue to work with Senate President Sweeney, Speaker Coughlin, the respective budget chairs, and leadership teams so we can, together, enact a stronger and more fiscally sound budget.”

Polls show more than 70% of NJ residents favor a millionaire’s tax, and special interest groups have rallied and lobbied. But lawmakers aren’t budging. As for Republicans?

“Here on the Republican side, we really do appreciate all the work that’s gone into taking out the tax increases,” said Sen. Steve Oroho.

“There’s a lot of room here to negotiate. It’s just going to be a matter of will they do it based on the numbers, or is there gonna be some sort of personality conflict that ends up getting in the way,” said NJ Spotlight budget and finance writer John Reitmeyer.

Democrats intend to pass their budget and send it to the governor on Thursday, which would give him about 1o days to decide what to do. If he vetoes, Democrats have threatened an override. The deadline is June 30, and if that passes without a new budget, state government could go into shut down.

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