New Jersey Gov. Phil Murphy announced a deal Thursday with lawmakers to hike taxes on the state’s wealthiest residents as part of a plan to provide relief to the middle class from the coronavirus crisis.
If it’s signed into law, it would be one of the first in the country to address state revenue shortfalls caused by the economic crisis by upping collections on the rich. Murphy, a Democrat, said he aims to have the tax finalized by October.
States across the country have been hit hard by the pandemic, which has forced businesses to close, sending sales tax revenue plummeting. Democratic calls for federal assistance to states have stalled, with President Donald Trump and other Republicans blaming governors and other local leaders for their budget problems.
Even some Democrats have been wary of raising taxes on the rich to fill the gaps. In neighboring New York, Gov. Andrew Cuomo has rejected similar calls, fearing they would cause the wealthy to flee.
Murphy, in contrast, said at a press conference announcing the plan that he was simply calling for “pennies on their top dollars earned” that would help “undo years of tax inequities.”
The deal would raise the tax rate on those earning more than $1 million per year to 10.75% from 8.97% and provide a rebate of up to $500 to households earning less than $150,000 if they have a child. The income cap for single-parent households would be $75,000. Previously, the 10.75% rate had applied only to those earning more than $5 million.
The rebate checks would go out next summer and are expected to benefit as many as 800,000 families, Murphy said. His administration had previously estimated that the tax increase could bring in $390 million in revenue.
“This is money our families need and money that will help spur our recovery and our future resiliency,” Murphy said.
State Senate President Steve Sweeney and Assembly Speaker Craig Coughlin, Democrats who had resisted the millionaires tax, said they had come on board with the plan.
“I bet a lot of you didn’t expect to see me here today,” Sweeney said after Murphy spoke.
Sweeney said he previously had a problem with the timing of the millionaires tax, but a “pandemic hit, and things have changed.”
“Helping middle class families to me makes all the sense in the world at this time,” Sweeney said.
Murphy, a former Goldman Sachs executive whose wealth is estimated at more than $50 million, campaigned for governor on a plan to raise taxes on millionaires and doubled down amid the coronavirus pandemic, which has strained state coffers and left millions out of work. On Thursday, he emphasized that the new tax was not driven by animosity toward the well-off.
“We do not hold any grudge at all against those who have been successful in life, but in this unprecedented time when so many middle class families and others have sacrificed so much, now is the time to ensure that the wealthiest among us are also called to sacrifice,” Murphy said.
State Republicans blasted the plan.
Doug Steinhardt, chairman of the New Jersey Republican Party, said in a statement that “these newest tax schemes will land in the same place every other Democratic tax scheme lands: in the pockets of New Jersey’s middle class.”
“Blink and you’ll miss the next Trenton tax hike,” Steinhardt said. “That’s how fast Phil Murphy and his Democrats are spending your money.”