Negotiations broke down in Trenton Friday as both the leaders of the Legislature and Gov. Phil Murphy walked away from the table without reaching an agreement on the budget.
The two sides have one day remaining to agree on a budget or the state will shut down when the clock strikes 12 on Saturday night.
“I wish I had better news,” Assembly Speaker Craig Coughlin said at an afternoon legislative press conference — one that was followed up by a press conference by the governor.
“We have still yet to achieve a compromise to avert a shutdown,” Murphy said. “There was a glimmer of hope, and I say that with sincerity.
“The Senate President and (Assembly) Speaker agreed that we need to ask the wealthiest to pay more to pay for the priorities that we share. That is a very good step.”
Just not enough to get a deal done.
This time, the negotiations over a modified millionaire’s tax and corporate business tax were disagreed over on philosophy rather than the estimated revenues from each, according to Assembly Majority Leader Lou Greenwald.
Murphy echoed similar sentiments.
“This is more than just getting to an agreement about dollars and cents,” he said.
The Senate and Assembly offered Murphy a 9.95 percent millionaire’s tax, keeping the number below 10 percent as has been deemed palatable by business experts. In addition, the tax only would apply to those who earn more than $5 million.
These changes, the governor said, made the offer more of a symbolic gesture rather than serious one since there are only 1,760 millionaires in New Jersey that would be affected, meaning the tax only produce $160 million for the state.
Murphy said increasing to a $5 million threshold would leave out a large segment of the 21,00 millionaires in the state, including Murphy himself, and cost the state several hundred million dollars in extra revenue.
Murphy said his number, 10.75 percent on all millionaires, would net the state $765 million, and is not a high enough number for concerns of tax warfare.
The legislators also said they offered a reduction in the CBT rates — eliminating the tiered approach and offering a blanket 3 percent raise from the current 9 percent. The percent would reduce to 1 percent over four years, after which it would return to 9 percent.
This was a significant change from 11.5 percent for companies earning $1 million to $25 million, and 13 percent — the highest rate in the country — for those with revenues more than $25 million.
The Legislature estimated this would rake in $672 million, while the Department of Treasury said it would net the state only $598 million.
The original offer Friday was a six-year surcharge of 3 percent the first two years, 2 percent the next two and 1 percent for the last two.
The governor countered with a blanket 2 percent over four years, after which the 3 percent over four years was reached.
Coughlin said they were outrightly rejected, without a counter offer, and returned from negotiations empty-handed.
Senate President Stephen Sweeney said that it appeared the governor was not willing to compromise and called out the governor’s business history.
“That is what they did at Goldman Sachs,” he said. “This is the Legislature, we are not going to be dictated to.”
Assembly Budget Chairwoman Eliana Pintor Marin said the proposal Friday was a “true olive branch.”
Both sides touted the others’ acknowledgement that the tax they originally proposed was a good tax. Murphy said it of the millionaires’ tax and the fact that the legislators came to the table with it Friday, and the Legislature said the same of Murphy having a dialogue about the CBT.
The most noteworthy frustrations came from Sen. Loretta Weinberg, who had been one of the most enthusiastic in support of Murphy on his inauguration day. But she said she hopes cooler heads prevail in the next round of negotiations.
New Jersey Business & Industry Association president and CEO Michele Siekerka said the business community is very frustrated with the way negotiations went Friday.
“We have said time and time again that taxing New Jersey’s job creators is a bad idea right now,” she said. “Regardless of if it’s on the millionaire’s tax, S-corps, LLCs or the big companies. There’s no discussion of who else should be giving up something right now.”
Siekerka reiterated that the government has yet to look for serious cuts, but is instead focused on finding revenue to fund its priorities.
“New Jersey was slow coming out of the recession. Right now, we have a strong couple of years, and we need to continue to invest in that,” she said.
New Jersey Chamber of Commerce vice president Michael Egenton echoed the frustration, but added that the business community, despite its opposition, has offered unbiased guidance in the process of crafting the corporate business tax hike proposal.
Coughlin said he was hopeful because there was still one more day left.
Meanwhile, Sweeney announced he canceled Saturday’s Senate session and anticipated canceling the Senate session Monday if the stalemate continues, and Murphy convened a late evening cabinet meeting to discuss a potential shutdown.