The state Senate and Assembly, as expected, passed a $32.7 billion budget Thursday — one that could come with an expanded millionaire’s sax and up to $4.5 billion in borrowing that they say will offset slumping tax revenue amid the pandemic.
It also came with some pork — and additional borrowing — that led to a budget that was $300 million more than Gov. Phil Murphy proposed Aug. 25.
And, as expected, it came with questions from Republicans and the heads of business groups, who wonder if the new taxes and borrowing were necessary.
Tom Bracken, the CEO of the New Jersey Chamber of Commerce, said the budget shows the process is more about politics than responsible fiscal management.
“The Legislature took what was already a bad budget and made it worse by weighing it down with hundreds of millions of dollars in additional and last-minute spending allocated to fund pet political projects, while still not addressing the economic realities of our state,” he said.
“Businesses across New Jersey have expressed outrage that they will have this budget strapped on their backs while they are trying to deal with an uncertain economic environment and an administration coming at them for more tax revenue.”
Gov. Phil Murphy and the leading Democratic leaders have said the budget will help the struggling middle class, pointing to a bill that was part of the budget process that includes a $500 rebate many families will receive.
The budget includes more revenue from taxes. Among them:
- The millionaire’s tax will increase the rate that families making over $1 million a year pay, to 10.75%.
- The corporate business tax will remain at 11.50% as the surcharge — which was scheduled to go down — will be kept at 2.5%, which Murphy estimates will bring $210 million in revenue this year.
- The HMO assessment on net written premiums also has increased, which the governor estimates with bring in an extra $103 million.
“The budget lives up to our most important objective: preparing our state for a stronger, fairer and more resilient future,” Murphy said Wednesday.
Republicans felt otherwise.
Assemblyman Gerry Scharfenberger (R-Red Bank) said the budget is the exact opposite of what they state needs.
“At a time when we need to help and support our residents and businesses, Trenton chooses to do the exact opposite,” he said. “Gov. Murphy’s budget only serves to increase the heavy weight on New Jersey’s taxpayers and job creators, who are already struggling to stay afloat in the state’s sinking economy.
“Trenton is choosing to penalize the businesses remaining in the state, which are already on the verge of bankruptcy, leaving them to choose between shutting their doors forever or moving across the Delaware. This leaves our shrinking middle class to fill the void, residents who are already stretched beyond a breaking point financially and have no other choice than to move themselves away from their friends, families, and homes — just to survive.”
Eileen Kean, the New Jersey state director for the National Federation of Independent Business, said the expected increase in unemployment taxes will crush state businesses next year.
“What you aren’t hearing much about today as this budget is approved is a bomb of a tax increase that will explode next year and fall on every business in the form of drastically higher unemployment taxes,” she said.
Last week, the Office of Legislative Services estimated that the unemployment payroll tax for employers would rise by $919 million next year, which pales in comparison to the amount raised by other tax increases in the budget.
“Those taxes automatically rise when the Unemployment Trust Fund becomes depleted, and we learned last week they are expected to go up by nearly a billion dollars next year,” Kean said. “If small businesses haven’t already permanently closed during the pandemic-related economic crisis, this could be the final nail in the coffin.”
Regina Egea, the head of Garden State Initiative, said the governor and legislators missed a big chance.
“The year’s budget represented an opportunity to set a new course for New Jersey’s fiscal path and move our state toward a more prosperous future,” she said. “Instead, our state’s competitive standing has further deteriorated by leaving New Jersey with billions of new debt, no closer to fixing our unsustainable public employee pension and health benefits systems, and the highest business taxes and third-highest income tax rate in the U.S.”
Bracken said there is a better way — a better path forward.
“The New Jersey Chamber of Commerce reiterates that the best path to fiscal recovery and economic growth in this state is to allow businesses to reopen and allow people to get back to their jobs,” he said.