“Be careful what you wish for.”
In the case of Gov. Phil Murphy, the phrase may need to be modified.
“Be careful what you wish for, you may get it — and a whole lot more.”
Such is the feeling as we wake up on the first day of fiscal year 2019 with a boatload of new revenue (all derived from taxes) coming to the state.
Murphy not only got his millionaire’s tax (granted, with a slightly higher threshold than he wanted) but also an increase in something he wasn’t going after, the corporate business tax (which will net revenues that are even higher than the Legislature wanted, now that combined reporting has been added to the process, not to mention the taxes on repatriated assets).
Murphy himself estimates those two taxes will create $1.141 billion in new revenue.
And that figure doesn’t include the revenue that’s coming from taxes on e-commerce (thanks to a timely Supreme Court ruling), nor does it count potential added revenue from taxes on short-term rentals (an Airbnb bill is headed to the governor’s desk) or recreational use of cannabis (still being debated).
Simply put, six months into office, Murphy has a revenue windfall that’s the envy of any executive anywhere.
Here’s the question: Will corporate executives be willing to play along?
The early guess? No.
Let’s be clear: There’s no one on the planet that doesn’t support Murphy’s noble goals of more educational opportunities for our kids, more benefits and wages for the working class, stronger urban communities and a modern transportation infrastructure system to help all of us get around.
The question has always been about paying for it.
Murphy feels strongly that those making the most money, both individuals and corporations, should pay the ultimate campaign slogan, “their fair share” — as if a system where the vast majority of collected tax revenue already comes from a small amount of people is inherently unjust.
And while it sounds good in sound bites, we’re not so sure it will play well in boardrooms when corporations have to decide if they want to stay here, or — and this is the harder task — move here.
It’s the time when CEOs and chief financial officers have to decide if what New Jersey is offering (location, educated workforce, etc.) is worth the surcharge that comes with it.
Simply put, we’re about to find out if New Jersey can compete with Texas, North Carolina, Tennessee, Pennsylvania and others when it has even higher taxes than it had last year.
To make New Jersey work, Murphy is going to have to find a way to way raise revenues that does not include raising taxes.
He’s going to need the full support of the business community to make the economy go.
At this point, he doesn’t have it.
Don’t confuse the relative silence of the business community for agreement with Murphy’s plans. Business leaders and their groups know they still need things from the governor and the Legislature, and don’t want to rock the boat. (They play business, not politics.)
It’s the reason for a simple late-night email I got Saturday night: “This is not good for Corporate America.”
Making friends with the business community figures to be a far more difficult task than making state Senate President Steve Sweeney and Assembly Speaker Craig Coughlin your new BFFs.
Murphy is banking that he can do it.
And, with the more than $1 billion he just picked up, he’s got all the seed money a former investment banker could hope for.
With it, he can no longer do two things:
- Blame the previous administration;
- Ask for more taxes.
Murphy said solutions to New Jersey’s economic problems will not come quickly or easily. In politics, however, there is no long game.
If the governor is at a podium 364 days from now still explaining how he needs more (rich) people to pay their “fair share” to get the state back on track, we’ll know his economic plan didn’t work.
If the state generates more than the $750 million surplus he is predicting (and he has preached he only uses real numbers), then he’ll be a roaring success.
And we’ll all have more than we could have ever hoped for.
Read more from ROI-NJ:
- Budget compromise still working its way through Legislature on Sunday; some suggest snag over combined reporting
- Business community surprised, upset to see ‘combined reporting’ in corporate business tax
- Business group leaders apprehensive about budget: Siekerka says, ‘This is all a big ask of business’
- Republicans respond: Why would raising taxes be worthy of a celebration?
- Friends or foes: Why one analyst is still worried about governor’s relationship with Legislature
- Budget agreement reached; shutdown avoided