Calling it a historic day for the middle class, Gov. Phil Murphy and a host of legislative leaders announced they had reached an agreement to lower the threshold on the millionaire’s tax from $5 million to $1 million — and to provide a $500 tax rebate check to approximately 800,000 New Jersey families.
“We know that, over the course of this pandemic, and, frankly, before it began, that our middle class needed help and the countless families working hard to achieve their middle-class dreams needed an extra push, and, while we continue to work together on the final pieces of what the next state budget will ultimately look like, today we are proud to stand together that our promise to help the middle class and those striving to join it is a promise that will be kept,” Murphy said.
Under the terms of the agreement, anyone making over $1 million will see their tax rate jump from 8.97% to 10.75% at the $1 million mark. This will go into effect for the next tax season.
The rebate will be for single parents making up to $75,000 and couples making up to $150,000 — provided they have at least one dependent child. They will automatically receive a check for $500 next summer.
Murphy, a multimillionaire himself, said he does not begrudge those who have been financially successful in their careers. To him, this is about tax fairness.
“In this unprecedented time when so many middle-class families have had to sacrifice, now is the time to ensure the wealthiest among us are also to called to sacrifice,” he said. “Pennies on their top dollars earned is a modest ask.”
Not surprisingly, the announcement was cheered by progressive groups and labor organizations.
CWA New Jersey Director Hetty Rosenstein said it was a great win.
“We applaud Gov. Phil Murphy for steadfastly maintaining his commitment to this progressive approach to raising revenue and funding services,” she said.
Also predictably, the move was ripped by Republican leaders and the heads of business groups, who said lowering the threshold of the tax will not have a great impact on the gap in revenues, as most of it will go to pay for the rebate for the middle class.
State Sen. Steve Oroho (R-Sparta), the Republican budget officer, said the deal will ultimately drive taxes higher for everyone.
Here’s something that was a surprise: Murphy was able to get an unlikely ally in the process — Senate President Steve Sweeney (D-West Deptford), who has long been opposed to raising taxes. Sweeney said dramatic times called for a dramatic response.
Sweeney said he has resisted the millionaire’s tax for years because of the timing. That timing, he said, has now changed.
“The pandemic hit, and things have changed, and we have to face the reality that a lot of families are hurting here,” he said. “Helping middle-class families makes all the sense to me at this time.”
Both Murphy and Sweeney gave credit to Assembly Speaker Craig Coughlin (D-Woodbridge) for the idea — and helping it get to the finish line.
Coughlin deflected any credit. Instead, he called it a historic win for the middle class.
“The agreement that we reached will provide much-needed tax relief for so many that can truly use a break,” he said. “It will make a tangible difference.”
All of the leaders said they are working to reach a budget agreement — and said they expect to have one before the Sept. 30 deadline.
Sen. Paul Sarlo (D-Wood-Ridge), the chairman of the Senate Budget and Appropriations Committee the past 12 years, said he’s particularly pleased that it appears these negotiations will not go down to the final hours — or extend past them, as they have recently.
“The leaders have come together and put together a budget process —and put together the biggest piece of it, the revenue piece — in a timeframe that allows it to be done in a transparent manner,” he said. “I’ve been part of budget processes that have been done at the last minute and in the dark of the night.”
Murphy, who said he would be “completely shocked” if an agreement wasn’t in place, deflected most of the questions about other aspects of the process. He said he didn’t expect any change to the sales tax, but he stayed away from a question about the corporate business tax.
Murphy wanted to keep the message on the tax relief he said is coming — and the expansion of the millionaire’s tax he has pushed for since taking office.
“This notion of asking those who can afford it the most to help us in our hour of need, drive money directly into the middle class and working families is a brilliant reality,” he said.