New Jersey Governor Phil Murphy released a budget proposal that would increase taxes and spending beyond what even some of his fellow Democrats agreed with.
One of the highlights of his proposal for increased state revenue is the “millionaires tax” which would create a state tax rate of 10.75% on income over one million dollars. This tax is estimated to create $765 million in revenue, alongside $100 million from closing tax loopholes.
His office also deemed that the decrease in sales tax to 6.625% this year due to the gas tax of last year was marginally beneficial to consumers while majorly detrimental to the state government’s budget, thus his plans include reinstating the 7% sales tax. His budget proposal anticipates $60 million in revenue from legalizing marijuana—though the recreational usage has yet to be legalized—and proposed a tax on ride sharing apps such as Uber and Lyft as well as home sharing programs such as AirBnB . Overall, they anticipate $1.5 billion in new revenue.
As for spending, he wishes to increase public school funding by $283 million, allocate $50 million for free college to 15,000 low income students, and put $3.2 billion toward public pensions (compared to Governor Christie’s $2.5 billion last year). He also took a step toward his eventual goal of a $15 minimum wage by setting the minimum at $11 for all state employees and contractors.
Murphy also wishes to alter the tax code by increasing the maximum gross income tax deduction from $10,000 to $15,000 (costing $80 million), creating a tax credit for daycare costs (costing $12 million but helping 74,000 families), and a three-year plan for increasing the Earned Income Tax Credit from 35% of the federal limit to 40%. The EITC is a tax credit for low income families that is based off of income and number of dependents. The tax breaks along with his social program spending will create $2.7 billion in new spending.
This tax proposal has stirred controversy in Trenton beyond party lines. For one, the $2.7 billion increase in spending is not balanced by an equal amount of taxation, creating a budget deficit. Also, Murphy had previously criticized President Trump’s tax plan for lowering the amount of state and local tax that citizens can deduct from their federal taxes—an issue that severely affects those in New Jersey. As Trump’s plan has gone through, capping state and local deductions to $10,000, Murphy’s new taxes add a burden on top of the decrease in federal tax deductions for New Jersians.
New Jersey Senate President Stephen Sweeney (D-Gloucester) opposes his fellow Democrat’s tax plan. He argues that the new federal tax code along with Murphy’s proposed tax plan would be too much too soon on wealthy NJ residents, and may prompt them to leave the state. Sweeney proposed the alternative of an increase of the business tax rate from 9% to 12% on all businesses with earnings over $1 million.
For current college age students, Murphy’s plans are a net positive as minimum wages are being pushed toward an increase, and community colleges will become more affordable for low income students.
For college students graduating soon and entering the adult world with financial insecurity and debt, Governor Murphy’s proposals are conflicting. Daycare cost tax-credits for those who want to start a family without sacrificing their careers, as well as overall increases in tax breaks for low income individuals will help young adults to get on their feet as they establish their independent lives.
However, an increasing minimum wage increases inflation rates and creates insecurity within the job markets. According to the economic research group EMSI, “most occupations that pay at or above the living wage aren’t affected by any changes to minimum wage laws.” Thus, a minimum wage increase will increase the income of those working for minimum wage, but those in entry level positions after college will have an immobile salary resulting in a devaluation of their income and degree.
Latest posts by Daniil Ivanov (see all)
- Galley Aferro Releases New Exhibits Through May 26th - April 17, 2018