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Third time’s a charm: Murphy’s 2021 budget proposes millionaire’s tax (updated)

Gov. Phil Murphy’s budget once again calls for a millionaire’s tax—twice blocked by the state Legislature.

The proposal would raise the tax rate from 8.97 percent to 10.75 percent for every dollar earned above $1 million, which would generate $494 million in the next year under Murphy’s proposal. That would make up roughly half of the $1 billion in new revenue that governor anticipates the state making this next year.

Should the millionaire’s tax be enacted in July, it would be retroactive to Jan. 1, 2020, so that the state would see a 10 percent bump in income tax this year.

There are 20,691 state residents and 21,290 non-state residents who would be taxed under this new proposal.

Let’s be clear – a millionaire’s tax doesn’t punish the rich; it lifts up the middle class and that’s good for everybody.
– Gov. Phil Murphy

In 2018, Murphy and the Legislature agreed to a “mega-millionaire’s tax” on earners above $5 million, which this year will affect 1,957 state residents and 5,479 non-state residents. His budget proposal last year also called for a millionaire’s tax, but was defeated by the state Legislature.

“Let’s be clear – a millionaire’s tax doesn’t punish the rich; it lifts up the middle class and that’s good for everybody,” Murphy said in his prepared remarks.

This year, Senate President Stephen Sweeney, D-3rd District, has conceded that he would support the millionaire’s tax in exchange for an additional $1 billion into the state’s pension payment, first according to a report by NJ Advance Media, and then confirmed to reporters on Tuesday.

“So, I thank the Senate President and welcome his willingness to embrace a millionaire’s tax in this budget,” the governor added. “When we have tax fairness, we can continue our historic investments in our pension systems and in our middle-class families.”

A senior Murphy official maintained that the Senate president’s proposal “is consistent with what we’ve done.”

“We’re already putting a billion more than what we put last year,” this person added.

Another $1 billion could mean deep cuts elsewhere to the budget, but “[w]e’re not leaving any stone unturned, we’re looking for savings everywhere.”

Murphy, in his budget address, dangled $279 million more in pension payments, which would mean a difference of $721 million between the two camps.

Although Sweeney supported the millionaire’s tax five times under then-Gov. Chris Christie, a Republican, he reversed course under Murphy.

Many residents who would be paying the millionaire’s tax, Sweeney argued, were already slammed by the $10,000 cap on state and local tax deductions—a contentious result of the federal tax cuts enacted in late 2017.

The governor decried the property tax, in his remarks, as “the most unfair, regressive, and cruelest of taxes.”

“A middle-class family in Merchantville or Milford or Moonachie, after all, pays a greater percentage of their income in property taxes than a millionaire anywhere else,” the governor said. “It’s easy to see how our middle class can feel cheated.”

Editor’s note: This story was updated at 7:42 a.m. EST on Feb. 26, 2020 to include additional remarks from Gov. Phil Murphy.

Daniel J. Munoz
Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.