Gov. Phil Murphy and legislative leaders appeared to be farther apart after four hours of budget talks Friday than when the day started, making it likely the first-year governor will have to decide whether to shutter state services starting Sunday.

Democratic lawmakers budged a bit on one of Murphy’s priorities that they had resisted – a hike in income taxes for the rich. But Murphy, who wants a rate of 10.75 percent on income over $1 million, rejected the offer to impose a 9.95 percent tax on incomes over $5 million instead.

Murphy said the offer was initially viewed as “a glimmer of hope” but that it would generate around $160 million a year in tax revenues, compared with his proposal’s $774 million.

“This was soon found to be only a symbolic thought,” Murphy said. “Their offer of a 9.95 percent tax rate on incomes in excess of $5 million would raise nowhere near what is necessary to get us into balance this year, let alone positioned for the future.”

Murphy said 1,760 taxpayers would be affected by what the New Jersey Working Families Alliance tagged as the “mega millionaires’ tax” – and that he wouldn’t have been one of them in the most recent tax year. He is a multi-millionaire former Goldman Sachs executive.

“This is ludicrous,” said Murphy, who says his income tax plan would affect 21,000 more taxpayers.

“When you come up with a symbolic offer just to say you could check the box, and we have had real substantive movement on things like corporate business tax, on being creative around millionaires’ tax, I have no time for that,” he said.

Democratic lawmakers thought it was a solid counteroffer and that it would raise more revenue than Murphy says.

“I was the one that was vehemently opposed to a millionaires’ tax. But listening to my colleagues, compromise is good, we compromised,” said Senate President Steve Sweeney, D-Gloucester. “The governor has not compromised one inch.”

Senate Majority Leader Loretta Weinberg, D-Bergen, said the alternate proposal on the millionaires’ tax was a “big step forward” – and that she wants progressives siding with Murphy to know that.

“I would hope that after everybody rests or cools off just a little bit that the governor will call us back and will agree to what I think was the big move we made today,” Weinberg said.

Murphy said he welcomed the willingness to consider a millionaires’ tax – and he indicated that if lawmakers agree to a heftier version, and can split the differences on their idea for a corporate business tax surcharge, that he’d drop his push to increase the sales tax to its former level of 7 percent.

“I said, ‘Listen, if we can get to a good place on the corporate business tax, I’m willing to reconsider sales’ – particularly given the Wayfair decision and the Internet money that we’re now putting at least some amount in. As long as we have a credible millionaires’ tax as part of the strategy,” Murphy said.

Lawmakers revamped their corporate tax surcharge plan and indicated that in the most recent incarnation, it would start at 3 percent, then step down gradually after four years before disappearing. Murphy seemed to indicate that he’d be willing to do a 2 percent surcharge.

Sweeney said “that’s where the money fell from heaven” in the federal tax cuts and doesn’t know why Murphy won’t tax what he estimates as a $2.9 billion windfall.

“He is more concerned about protecting corporations that had billion-dollar windfalls from Donald Trump – because that’s what he wants to do,” Sweeney said. “He wants to keep reducing the amount of revenue from them, but he would rather raise taxes on the people of the state of New Jersey. Enough.”

Assembly Speaker Craig Coughlin, D-Middlesex, said Friday’s offer added back $20 million for community colleges to become tuition-free for some residents, a Murphy priority that isn’t in the Legislature’s current budget plan, beyond $5 million in planning grants.

“In response to our last proposal, the governor offered no compromise. Offered no counterproposal. Rejected it out-of-hand,” said Coughln, who said he is “bitterly disappointed.”

“If our state government is facing a shutdown,” Sweeney said, “it’s because the governor believes negotiations consist of one side not budging until the other bends.”

“There’s a game, and I keep telling my friends this,” Sweeney said. “He wants to run the clock. I guess he feels that if there’s a lot of pressure that he would get his way.”

Murphy convened a Cabinet meeting Friday night to discuss issues include a potential shutdown. He didn’t provide details about what might shut and when.

“This is crunch time. July 1 is the day after tomorrow,” Murphy said. “Everyone says that they don’t want a shutdown, but the Legislature’s inability to move beyond the old, tired way of doing things belies those words.”

Lt. Gov. Sheila Oliver, a former Assembly speaker, said legislative leaders were misrepresenting the negotiations when they said Murphy wasn’t willing to compromise. She said this is the 15th state budget she has been part of adopting.

“In the 15 years, 14 as a legislator, and now the past five and a half months as lieutenant governor and commissioner of a department, I have never seen the level of obstructionism come from the legislative leadership as I am seeing in this cycle,” Oliver said.

Coughlin and Sweeney said they would be in Trenton Saturday. The Assembly holds a voting session, though the Senate session was canceled. They said the next step is a counter-offer from Murphy.

“We’re disappointed,” said Assemblywoman Eliana Pintor Marin, D-Essex, the Assembly Budget Committee chairwoman. “We still have hope. We still have tomorrow.”


New Jersey: Decoded cuts through the cruft and gets to what matters in New Jersey news and politics. Follow on Facebook and Twitter.


Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at michael.symons@townsquaremedia.com

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