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On Tuesday, Governor Phil Murphy (D-NJ) delivered his first budget address, and the reception from both sides of the aisle has been lukewarm. He unveiled a $37.4 billion budget proposal full of progressive goodies, as well as calls for a plethora of new taxes and fees. Overall, the budget is $2.4 billion, or 8%, larger than the current one, and it hardly tackles the meat and potatoes of the Garden State’s fiscal woes.
In 2017, Truth in Accounting, a think tank that analyzes government funds, listed New Jersey as the state with the worst finances. The Garden State has more than $200 billion in debt, each taxpayer is responsible for nearly $70,000 of the red ink, the public pension system faces $120 billion in unfunded benefits, and “accounting gimmicks” allowed bureaucrats to miscalculate its finances by $57.6 billion.
Murphy thinks he has a way to remedy the fiscal crisis: more taxes, more spending, more of everything!
If you thought New Jersey was terribly managed under former Governor Chris Christie (R-NJ), just wait until newly-elected Governor Murphy’s first year has come to an end.
Let’s examine the trinkets found inside the Democrat’s bag.
Across-the-Board Tax Hikes
It was clear in his first state legislature address that Murphy wants to raise taxes everywhere.
Murphy plans to raise the sales tax to 7%, up from 6.62%. He aims to close corporate tax loopholes, including carried interest, something that his office anticipates will generate $100 million in new revenues. The budget calls for the end of Internet transaction loopholes, too.
The governor also wants to slap new levies on Uber, Airbnb, Lyft, and e-cigarettes. He further intends to legalize marijuana, but Murphy wants to penalize it as well, projecting it will bring in $60 million.
The biggest aspiration for Murphy is a millionaire’s penalty. Under his proposal, New Jersey would have a 10.75% marginal tax rate on income over $1 million, which he thinks will garner $765 million for its coffers. Many states have tried this, including Connecticut and Maryland, and the result was a mass exodus of wealthy taxpayers, leaving these jurisdictions panicking to fill budget gaps.
The only good measure he has is a $5,000 increase to the cap on the state income-tax deduction for local property taxes from $10,000 to $15,000.
Spending and Social Endeavors
Murphy told lawmakers:
“It’s no secret that we face real challenges. But I am more confident than ever that we have what it takes to build a stronger, fairer New Jersey.
If we enact another budget like the one our administration inherited, our middle class will continue to be the ones shouldering the burden, while seeing little in return.”
His idea of establishing a “strong, fairer New Jersey?” Spend, spend, spend!
Transportation and education will be major objectives for the new governor.
NJ Transit is expected to receive $167 million in new funding. New Jersey is spending $50 million to allow an estimated 15,000 students from families with household incomes of under $45,000 to attend community college for free as of spring 2019. It further plans to make community college entirely tuition-free by 2021 or 2022.
That isn’t all for the education file. Trenton will hike elementary and secondary school spending by $341 million for a total of $14.9 billion. School aid will see a dramatic surge of $1 billion over the present fiscal year (ends June 30).
On the social front, the New Jersey minimum wage will be raised to $15 over a four-year period. It will jump to $11, from $8.60, in 2019. Murphy believes the minimum wage hike will boost the economy by increasing the incomes for more than one million residents. Like the millionaire’s tax, this can only breed disastrous consequences.
NJ will continue funding the fight against the opioid crisis, but it will see a substantial reduction under Murphy’s budget: from $200 million to $100 million.
What About the Pension Crisis?
As New Jersey mafiosos would say, fuhgeddaboudit.
New Jersey’s public pension and health-benefit system is on the road to fiscal disaster. Policymakers are in denial, though. Earlier this month, Elizabeth Muoio, acting treasurer, thought it was a grand idea to raise the public pension system’s rate of return from 7% to 7.5%. Experts say that this would provide short-term relief for municipal governments, but they contend it is kicking the can down the road.
Today, New Jersey’s pension, healthcare, and retirement plans account for 15% of the entire budget. It is projected to soar to nearly one-third by 2023. Meanwhile, its unfunded public-pension and retiree healthcare liabilities are between $200 billion and $253 billion – no wonder why its bond rating is the second-lowest in the country, trailing only the bankrupt Illinois.
Murphy has a feeling he has solved its woes: turn to the taxpayers to bail out civil servants. The proposed budget consists of a record $3.2 billion payment to the $77.6 billion New Jersey Pension Fund. This, his office prognosticates, will allow the state to continue full funding by 2023.
“Taxes, Taxes, Taxes”
Assembly Republican Leader Jon Bramnick may have had the best response to the budget address:
“You kept hearing the same word: investment, investment, investment. Let me interpret that for you: It’s taxes, taxes, taxes.”
He’s right. Rather than implementing a series of spending cuts, Murphy took the easy way out: tap the already cash-strapped taxpayer. Fortunately, there are several Democrats who appear to be opposed to the government’s suggested tax hikes, likely because they remember the recent electoral history of leaders who wanted to fleece taxpayers: the one-term ouster of former Governors Jon Corzine and James Florio.
Can Murphy survive more than four years on a progressive, high-tax platform? Christie was the least popular governor in state history. He fought public sector unions, unsuccessfully ran for president, and insulted taxpayers. Yet, he still managed to miraculously serve eight years. It just shows that anything is possible in politics, especially in New Jersey.
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