Fears of public outrage over tax hike fight don't frighten Phil Murphy
Murphy sees big payoff, limited risk in raising taxes
Former Gov. Jim Florio sat quietly among the distinguished guests in the front row of the Assembly chambers as Gov. Phil Murphy outlined his plans to raise taxes.
But moments after the speech, Republicans quickly cast Florio in the familiar role as New Jersey's liberal bogeyman. Murphy is doomed to face the same fate as Florio, whose historic tax hikes in 1990 led to a historic debacle for Democrats a year later, they argue.
“I’ve seen this movie before. It was called Florio One. Now we have Florio Two, the sequel,'' said Assembly Republican leader Jon Bramnick, a Westfield lawyer and part-time stand up comic.
But Murphy is gambling that the Florio years are a faint memory for an electorate that has grown more solidly Democratic over the past three decades. Voters, Murphy and his allies argue, view tax hikes as a necessary evil in order to maintain New Jersey's public schools, road, and transit and have grown weary of scant investment during the no-tax reign of Republican Gov. Chris Christie.
That's a view shared by a number of Democratic survivors whose careers were shaped by the trauma of the tumultuous Florio term of 1990-1994.
And one of them is Florio himself.
"In some respects it's a mark of immaturity," said Florio, who at 80 years old is still as feisty as he was during his political prime. "What do they (Republicans) want to do about pensions? What do they want to do about New Jersey Transit. The juvenile thing is to throw out bumper-sticker slogans."
On some levels, the Florio-Murphy linkage is simply irresistible for Republicans. Florio's decision to push through a $2.8 billion package of tax increases in the first six months of his term sparked a taxpayer uprising.
The next year, Democrats lost 10 seats in the Senate and 21 in the Assembly, giving the GOP veto-proof majorities and a mandate to rollback the Florio agenda.
Florio also paid a steep price – although he slowly redeemed his standing with voters, it was not enough to hold off Republican Christie Whitman, who ousted him in 1993 with 1 percent of the vote, or 26,000 ballots.
Tax hike trauma
It was a dark age for the Democrats. It would take the better part of the next decade before they reclaimed power in the State House. For years, the Florio experience traumatized Democrats, who remained skittish at backing broad-based tax increases (although they had no problem raising scores of fees and smaller, targeted tax hikes.) Now, Murphy is representing a break from the past.
"The spending is not radical at all. The priorities are fully in line with the Democratic Party, which the public has chosen to lead the state,'' said Ben Dworkin, director of the Rowan University Institute for Public Policy and Citizenship. "His unabashed, unapologetic advocacy for new taxes to help pay for this, is not something that we have seen in a while."
But there are plenty of reasons the Florio past won't serve as a useful prologue to the Murphy plan. New Jersey is far more of a solidly Democratic blue state than it was in the Florio era, which just came off eight years of Republican Gov. Thomas H. Kean and had backed George H.W. Bush in the 1988 presidential election.
Florio didn't campaign on a promise to raise taxes during his 1989 campaign for governor, saying at one point that he "saw no need to raise taxes" if elected. But soon after taking office, Florio announced that the $300 million surplus Kean projected in his final budget had morphed into a $600 million deficit.
He also faced the likelihood of a Supreme Court decision demanding a steep boost in aid to public schools. So, he rammed through the tax package, igniting howls of betrayal.
Murphy, on the other hand, made no secret of his desire to raise taxes on incomes of $1 million during the campaign – it was a mainstay of his platform. Polls also have said that most New Jersey taxpayers support a tax on millionaires as long as it is used to pay for public schools.
Murphy also promised to close corporate loopholes and impose taxes on the legal sale of marijuana if a law is enacted. And after making those promises, Murphy won by 13 points over Republican Kim Guadagno.
Murphy's tax hikes will likely touch fewer people than Florio's historic tax-increase package.
Florio bumped the top income tax bracket from 3.5 percent to 7 percent; Murphy's proposed 10.75 percent rate for millionaires would apply to only about 20,000 taxpayers.
Florio's boost in the sales tax from 6 to 7 percent was also far more expansive than what Murphy is proposing. Under Florio, the sales tax ballooned to include a whole range of exempted items, such as paper products. In some ways, the sales tax expansion did more political damage than the actual tax hikes.
It became derided as the "toilet paper tax" and a rallying cry for an anti-tax group, Hands Across New Jersey. Protesters draped trees with toilet paper on trees during one State House rally.
It should be noted that Murphy did not campaign on a promise to restore the sales tax to 7 percent. Analysts say the proposals could make Murphy vulnerable to Republican criticism of boosting a regressive tax that falls disproportionately on lower income families.
"We are going to hurt the small people, the working class, the working poor with that sales tax increase,'' said Assemblyman John DiMaio of Hunterdon, ranking Republican on the Assembly budget committee.
But other Democrats note that most of these families spend most of their money on food and clothing, which is exempted from the tax. And the restoration from 6.625 percent to 7 percent is so small and on a rate that's only been in effect since January, that most people won't notice. And Murphy's sales tax plan doesn't seek to take paper and other items exempted by the sales tax
An $85 bet
In an interview, Murphy said the sales tax hike could cost an average middle class family about $85 a year.
"I'm not making light of the $85 but the question is what can we deliver back to the family?" he said. He then ticked off some of the spending highlights in his budget – funding for the addled NJ Transit, funding for preschool programs and community college tuition and beefed-up education aid.
"We determined that we could deliver a whole heck of a lot more for that family and their future than the 85 bucks,'' he said.
Murphy is also casting the sales tax hike as a kind of cleanup job from the fiscal mess left behind by Christie, his predecessor. Christie brokered the sales tax cut in exchange for his support for a 23-cent hike in the gasoline tax to cover transportation needs.
Florio took other steps that inflamed the electorate in his first six months. He pushed through the state's ban on assault-style weapons, infuriating gun enthusiasts and the National Rifle Association.
Gun groups channeled their fury by helping foment the tax protest in collusion with Republican Party operatives, who recognized the growing rebellion.
In comparison, the most controversial policy championed by Murphy is legalizing marijuana, which he argues will correct a long-standing social injustice, but is projected to raise $60 million in the new fiscal year. Public polls show a majority of the public supports the idea, although some Democratic legislators have expressed reservations.
But Murphy is also relying on recent fiscal history to make his case. Former Gov. Jim McGreevey created a new 8.97 percent top rate on incomes over $500,000 and dubbed it a "millionaires tax." Voters didn't punish lawmakers who supported it. And Democrats maintained majority control despite supporting Democratic Gov. Jon S. Corzine's 10.75 surcharge on millionaires and a one-cent increase in the sales tax in 2006.
Murphy's plan is also resting on the belief that New Jerseyans will agree to pay more as long as they receive a noticeable return on their investment.
They are willing to pay more for a reliable and efficient transit system, he argues, but under Christie, riders saw chronic delays and a crumbling system despite a 36 percent hike in fares. After eight years of anti-tax stinginess under Christie, voters may be willing to make that investment.
"He's not promising the moon,'' said Jon Shure, Florio's former spokesman. "He's not saying I'll make it cheap to live in New Jersey. He's saying that I'll make it worthwhile to live in New Jersey."