In what’s beginning to sound like a repeat of last year’s statewide budget battles that pitted Democratic legislatures against Republican governors in states like Maine, New Jersey and Illinois, the Democrat-controlled New Jersey legislature is trying to jam a plan that would raise taxes on corporations down the throat of the state’s fledgling governor, Goldman Sachs alum Phil Murphy.
However, there’s one key incongruity here that might raise eyebrows among voters who don’t live in the Garden State: Murphy is also a Democrat – yet his tax plan, which would rely on long-term increases in sales taxes as well as a hike on income taxes for the wealthiest individuals, has been resoundingly rejected by lawmakers – including State Senate President Steve Sweeney, who lost out to Murphy in the gubernatorial primary to replace outgoing governor Chris Christie, according to NJ.com.
The Senate Budget Committee passed the budget bill 8-3 (including two abstentions), and the Assembly Budget Committee passed their bill 9-4. By ignoring the governor’s plan and instead moving ahead with its own, the legislature is hoping to send a resounding message to Murphy: “We don’t answer to you.”
New Jersey lawmakers on Tuesday flexed their muscles in advancing a state spending blueprint that eschews Gov. Phil Murphy’s call for income and sales tax increases in favor of higher taxes on the state’s largest corporations.
“The bill is hot off the press,” state Senate Budget Chairman Paul Sarlo, D-Bergen, announced before that committee voted along party lines on the $36.5 billion state budget that Murphy has already vowed to veto.
Legislative leaders have said they intend to put the budget before the two houses on Thursday, sending the bill to the governor, and with it, a message that the state Legislature doesn’t answer to him.
“The Legislature is an independent body. We’re equal partners and we’re expressing that right now,” state Senate President Stephen Sweeney, D-Gloucester, told reporters at the Statehouse Tuesday. “The Legislature is not going to accept ‘my way or the highway’ talking. We’re not subservient.”
Sweeney and Murphy have exchanged criticisms of their respective plans. Lawmakers criticized Murphy’s plan for failing to take advantage of corporations’ savings on their federal tax bill as Murphy blasted lawmakers’ budget plan as “irresponsible and temporary” – a reference to the fact that lawmaker’s tax plan would only last for two years.
But perhaps the most trenchant criticism of the legislature’s plan came from Republicans and Democrats who correctly pointed out that the tax hikes on corporations (some of which would be used to help fill the massive funding gap in New Jersey’s public-employee pensions) would cement New Jersey’s status as the “least friendly state in the US for corporations.”
The legislative budget retools the corporation business tax hike Sweeney proposed earlier this year, adding two new temporary tiers that would tax businesses with net income between $1 million and $25 million at a 11.5 percent tax rate and businesses with more than $25 million in net income at 13 percent — the highest rate of any state.
Sweeney said the tax should end after two years.
State Assemblyman John McKeon, D-Essex, voted in favor of the budget, he said with “trepidation” and hope the Legislature and governor would manage to find a compromise in the coming days and an alternative to that two-year tax.
“It sunsets in two years. That’s crazy,” McKeon said. “What does that mean two years from now?”
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Business lobbyists and Republican lawmakers warned that the higher taxes would position New Jersey as the least-friendly state for corporations in the region.
New Jersey ought to be a “economic monster,” said Assemblyman John DiMaio, R-Warren.
“I just can’t help but realize that as we make this move – and I truly hope it’s temporary – that we’re not keeping more businesses from coming in,” he said. “I just hope this is not going to damage the business climate.”
As NorthJersey.com points out, both sides agree that taxes must be raised to beef up funding for public schools, NJ Transit and, of course, the state’s “troubled public pensions.” But thanks to today’s Supreme Court ruling, which opened the door to states collecting sales tax on e-commerce purchases made by its residents, Jersey could reap an additional $216 million to $351 million in tax receipts, according to some estimates. Murphy, Sweeney and Assembly Speaker Craig Coughlin, who along with Sweeney spearheaded the legislature’s bill, met Thursday morning to discuss their proposal with the governor. But given how budget battles have played out over the past year in states across the US, we imagine this, too, will snowball into a last-minute nail-biter, as Sweeney and Murphy refuse to lose face to their former opponents.
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