Murphy's plan — Raise sales tax, business tax, some income tax

Gov. Phil Murphy is proposing more than $1.5 billion in tax hikes to support a $37.4 billion budget for fiscal 2019, including the restoration of the sales tax to 7 percent.

Murphy wants to increase the state’s direct subsidy to NJ Transit so it can balance its budget and hire additional staffers without increasing fares, increase the earned income tax credit for the working poor, create a new child and dependent care tax credit for families earning less than $60,000 and lift the cap on the state income tax’s property tax deduction to $15,000 from the current $10,000.

Raising the sales tax by three-eighths of a percent would reverse a cut made in conjunction with increasing the gas tax in 2016.

“For many of our taxpayers, this was not a significantly noticeable amount, but it made a major hit to our general fund revenues and prohibited us from being able to make serious investments in New Jersey’s future,” said acting Treasurer Elizabeth Maher Muoio.

Murphy also proposes to tax Airbnb-style short-term rentals and ridesharing operations such as Uber and Lyft. He also wants to apply the tobacco products tax to e-cigarettes, increasing their cost and state tax collections by $65 million.

Murphy’s budget plans for the state to legalize marijuana for adult use by Jan. 1. Sales would be covered by a 25 percent excise tax, as well as the 7 percent sales tax. The state projects $80 million in collections for the state the first year, eventually increasing to $300 million.

Phil Murphy’s first budget address as NJ Governor: Watch Live

Murphy is also proposing to raise taxes on income over $1 million, at the rate of 10.75 percent, and levy a fee on carried interest that would amount to a $100 million tax increase on Wall Street hedge-fund managers.

Murphy is proposing around $110 million in increased business taxes, in ways intended to make it less volatile and more predictable. These include combined reporting with a limited ‘water’s edge’ election, market-based sourcing and reinstituting the taxation of international holding companies.

Assembly Minority Leader Jon Bramnick, R-Union, said he was shocked by the new spending and taxes.

“Gov. Murphy is taking New Jersey in the wrong direction,” Bramnick said. “This is going to force more middle-class New Jerseyans to flee the state. Now it is up to the majority in the legislature to stop this plan. This is déjà vu all over again.”

Senior administration officials, including Muoio, briefed reporters on the budget proposal late this morning, on the condition the information be embargoed until 2 p.m. The governor is delivering the budget speech this afternoon.

The direct subsidy to NJ Transit would increase by $242 million, to $383 million. Senior administration officials said that would more than replace a reduction of around $120 million in federal funds and the money sent to NJT from the New Jersey Turnpike Authority.

School aid would account for nearly $15 billion in state spending, including the payment into the teachers’ pension fund.

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The Murphy administration says it plans to fully fund the school-aid formula within four years. This year’s increase is $284 million would provide an increase to 94 percent of districts. No districts would be cut.

The budget proposes an additional $57 million in preschool funding, including an extra $25 million – bringing the total commitment to $50 million – to expanding preschool programs. The extra money would help an extra 3,500 four-year-olds enroll in programs this year, according to budget documents.

Murphy wants to take a first step toward meeting his campaign goal of tuition-free community college by spending $50 million on the program, which would cover nearly 15,000 students from families with incomes below $45,000. It would take effect in the spring 2019 semester. His goal is to have community college entirely tuition free by 2021.

The pension contribution would increase to $3.2 billion, which is six-tenths of the full amount that actuaries say should be made.

Senior administration officials said Murphy’s budget projects that the minimum wage will be raised to $11 per hour as part of a four-year phase-in to $15 an hour and makes provisions to cover the initial increase for state employees and contractors.

The budget proposes $2 million to create a Center on Gun Violence at a New Jersey college. When Murphy and other governors agreed last month to create a States for Gun Safety coalition, made up of six states and Puerto Rico, they said the states would designate colleges to create a research consortium that would conduct research the federal government has been banned from funding since 1996.

The budget also includes $2.1 million to support legal aid programs for low-income, undocumented immigrants facing deportation.

Murphy’s plan — Raise sales tax, business tax, some income tax