NJ budget agreement: Deal on taxes, spending increases includes gimmicks Murphy faulted
One day after Gov. Phil Murphy declared that “the era of budget gimmicks is ending,” a budget took shape that relies heavily on temporary revenue grabs — exactly the type of “unsustainable” sources he said for months that he would reject.
Lawmakers spent Sunday in Trenton finalizing the $37.4 billion agreement Murphy struck with Democrats late Saturday, hours before the constitutional deadline would have triggered a possible government shutdown.
Both houses voted Sunday to amend the budget and cleared several other related measures Murphy needs to sign, a process that took hours due to the complexity of the last-minute changes and desire to finish them before state offices opened Monday.
Aides and legislative experts had to figure out how to amend a budget and tax increase package that Democrats had already approved June 21 but Murphy had rejected. They also had to cobble together highly technical new rules for business tax reporting in a day, a demand from Murphy as part of Saturday's deal.
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Murphy had yet to formally sign the budget into law — he vowed Saturday to do so "as soon as humanly possible" — but it's now clear he agreed to short-term fixes that are expected to bring in nearly three times more revenue than a revised tax on millionaires he accepted Saturday.
Murphy did secure some concessions from lawmakers on more permanent tax hikes, but they pale in comparison with the roughly $1.3 billion in revenue he had been hoping to get from a true millionaires tax and a restoration of the sales tax to 7 percent.
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Murphy abandoned the sales tax proposal Saturday and settled for a “multimillionaires” tax on income over $5 million, which is expected to bring in $280 million this year. He had originally hoped for $765 million in revenue from his proposal to tax incomes over $1 million and $581 million from increasing the sales tax from the current 6.625 percent.
He also estimated that New Jersey will bring in about $200 million this year from adopting a combined reporting standard that will make it harder for companies to shift profits to lower-tax states, and another $188 million from taxing a larger share of online sales, as authorized under a recent U.S. Supreme Court ruling.
"I'm happy it's over," Senate President Stephen Sweeney, D-Gloucester, said after Sunday's voting session, nearly 12 hours after it opened. "This year was not a fun process."
Republicans protested the tax hikes to the bitter end Sunday, with Assembly Minority Leader Jon Bramnick, R-Union, dubbing July 1 the “Governor Murphy Tax and Spend Day.”
"Probably in the history of New Jersey, we haven’t seen a day where we raise so many taxes and spend so much money," he said.
The budget agreement also left at least one progressive group disappointed. Gordon MacInnes, president of the left-leaning think tank New Jersey Policy Perspective, said in a statement that the budget is “a step in the right direction” but doesn't “sufficiently” address long-term needs.
“New funding for public education, transit infrastructure and property tax relief should help jump-start New Jersey’s economy, but these critical investments are put at risk by the temporary and volatile funding streams meant to pay for them,” MacInnes said.
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The temporary sources of revenue Murphy agreed to are not all "one-shots" in the truest sense, because some of them last several years. But they will not raise enough money on their own for Murphy to ramp up spending in his second, third and fourth budgets to the same extent he does in his first.
The temporary revenue includes:
- $425 million from a four-year increase in the top-end corporate business tax;
- $200 million from a tax amnesty program, allowing delinquent tax filers to pay penalties at a reduced rate; and
- $200 million from a tax on repatriated corporate assets, which will decrease to $40 million in future years.
Budget analysts and Wall Street credit-rating agencies have long faulted such fixes because they usually last a single year, leaving a hole in the next year's budget.
On the other hand, Murphy's budget does build up the state's reserve fund, which the rating agencies prefer.
Who will pay?
The revised millionaires tax creates a new tax bracket of 10.75 percent on income over $5 million, which will affect about 1,760 residents. The state’s personal income tax rate currently tops out at 8.97 percent on income over $500,000.
Corporations earning more than $1 million in income will see their tax rate increase to 11.5 percent, up from the current 9 percent. That will decline to 10.5 percent after two years and return to 9 percent after four.
Murphy and lawmakers are also leaning on corporations via the tax on repatriated assets and the combined reporting standard.
Murphy and the Democratic leadership also agreed to a series of new fees on ride-shares like Uber, home-shares like Airbnb and liquid nicotine used in e-cigarettes.
In addition, the Legislature budgeted $23 million from a new 5-cent fee on single-use paper and plastic bags that could take effect this fall. Murphy did not include that revenue in the budget and is reviewing the bill, according to the Treasury Department.
Win for hair braiders
Unrelated to the budget process, lawmakers sent a bill to Murphy on Sunday that would deliver a hard-fought victory to hair braiders, who have been fighting for decades for an exemption from the state’s cosmetology licensing laws.
Under the current law, hundreds of hours of cosmetology school are required for someone who wants to make a living by braiding hair, even though the schools don’t provide courses on the craft. Critics describe that requirement as the epitome of over-burdensome licensing requirements.
Murphy could end that rule if he signs A-3754, which also establishes an advisory committee tasked with issuing registrations for hair braiding establishments and maintaining a record of those businesses in the state.
Parking meter cameras
The Senate advanced amendments to a bill authorizing towns to use parking meters installed with cameras that can help issue near-instant tickets.
While current law requires parking tickets to be placed on the windshield of a car, the bill would allow for tickets to be issued through the mail using the state courts’ e-ticketing system after police or parking enforcement officers review meter-generated footage.
The amendments extended the grace period during which a driver can feed a meter after pulling into a parking space from three minutes to five minutes. Drivers would also have the same grace period after their time expires.
A mobile phone app would be integrated with the meters, as part of the bill requirements, to notify drivers about their time and to let them buy more time remotely. Opponents of the bill, which still needs approval by the Assembly before it heads to the governor’s desk, say it could hurt downtowns. The bill is also reminiscent of the red-light camera program that ultimately shut down in 2014 after public backlash.
Staff Writer Catherine Carrera contributed to this article. Email: firstname.lastname@example.org and email@example.com.
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