New Jersey Gov. Phil Murphy (D) is again pushing for an expanded millionaire’s tax in a revised budget proposal.
The nine-month budget proposal, which covers October 2020 through June 2021, echoed Murphy’s call for an expansion of the millionaire’s tax in his fiscal 2021 budget, introduced in February. In the wake of the COVID-19 pandemic, the state extended its fiscal 2020 through September, and a three-month stopgap budget was passed to cover July, August, and September.
Under the August 25 proposal, the 10.75 percent marginal tax rate on income exceeding $5 million would be expanded to include income above $1 million, which is expected to generate $390 million in fiscal 2021.
“Building a stronger New Jersey requires us to ask those who, in some cases, continued to prosper as this pandemic raged around us — and most certainly were hurt less — to do more so we can strengthen the middle-class families who are the backbone of our state,” Murphy said during his August 25 budget address. “That means the wealthiest among us — millionaires and large corporations — need to pay their fair share in taxes, whether it be on income or in buying a yacht.
"In doing so, we can alleviate the pain being felt by the millions of middle-class families and the working poor reaching to lift themselves out of poverty, and secure a better place for them through job-training and workforce development — things that will make our economy stronger and benefit our business community for generations to come,” Murphy continued. “And, in particular, in renewing my call for a millionaire’s tax, let’s be honest about who this pandemic has hit the hardest — our middle class and low-income working families — and this tax would not impact them at all.”
Murphy proposed several other tax policy changes, including extending the corporation business tax (CBT) surtax adopted by lawmakers in 2018. The four-year surtax was imposed on companies with over $1 million in allocated net income at a rate of 2.5 percent for tax years beginning on or after January 1, 2018, through December 31, 2019, and was reduced to 1.5 percent for tax years beginning on or after January 1, 2020, through December 31, 2021.
“The 2.5 percent surtax rate dropped to 1.5 percent in January 2020, reducing FY 2020 and FY 2021 tax revenues,” according to the revised budget proposal. “Restoring the 2.5 percent rate for Tax Years 2020 and 2021 and beyond would yield an estimated $210 million during FY 2021.”
Murphy’s revised budget also called for a 5 percent surcharge “applied to certain federally qualified business income” for individuals with income exceeding $1 million, which would take effect starting with tax year 2021. “This restores a measure of equity following the substantial federal tax cuts instituted in 2017 that disproportionately benefited higher income earners,” according to the budget, referring to the Tax Cuts and Jobs Act of 2017. The proposed measure is expected to generate an estimated $75 million in the spring of fiscal 2021.
Murphy further proposed an increase of the cigarette tax to $4.35 per pack, which could generate about $143.1 million for eight months of fiscal 2021. He also called for increasing registration fees and penalties and imposing new assessments on opioid drug manufacturers and wholesalers, which could generate about $15 million in fiscal 2021. Another proposal would “increase the current annual assessment on net written premiums of HMOs from three percent to five percent and raise an estimated $102.7 million in FY 2021.”
Other proposals included restoring sales and use tax on limousine services, eliminating an exemption and cap on sales and use tax for boat sales, increasing firearm fees, and implementing excise taxes on firearms and ammunition.
In response to the revised proposal, Ralph Albert Thomas, CEO and executive director of the New Jersey Society of Certified Public Accountants said in an August 25 statement, "The Governor’s proposal to expand the millionaires’ tax and reinstate a 2.5 percent surtax on corporations will drive businesses and high-earning residents and their tax dollars out of the state."
“A reliance on higher taxes to finance unsustainable spending levels will sentence New Jersey for decades to remain last in business climate and first in outmigration,” according to Thomas.