Higher NJ sales tax: ‘Nearly imperceptible’ or ‘beyond callous?’
Gov. Phil Murphy’s first budget looks a lot like what he campaigned on – higher taxes on the rich and corporations, the legalization and taxation of marijuana, increased spending on public schools and NJ Transit, a first step toward tuition-free community colleges, a higher minimum wage.
One of the few surprises was a call to return the sales tax to 7 percent, up from the current 6.625 percent level to which it was lowered as part of the deal that raised the gas tax nearly 23 cents per gallon.
“Let’s be honest, the impact of the three-eighths of one percent sales tax decrease has been nearly imperceptible to the average family, but has directly impacted our ability to provide better services to, and greater future investment in, that family,” Murphy said in his 54-minute speech to the Legislature.
Republicans strongly disagreed, noting the change would cost taxpayers an estimated $581 million.
“I think it’s beyond callous to think that people don’t notice when taxes are increased,” said Senate Minority Leader Tom Kean Jr., R-Union. “I think people who are making decisions on a daily basis as to whether they can take their kids to a movie or need to work that extra hour, tax changes impact everybody’s long-term ability to spend time with their family.”
“We are going to hurt the small people, the working class, the working poor, with that sales tax increase,” said Assemblyman John DiMaio. “That hurts everybody.”
Sen. Shirley Turner, D-Mercer, said people wouldn’t notice a three-eighths sales tax increase unless buying big-ticket items like a sports car.
“I don’t think it really makes that much difference whether it’s 7 percent or 6 and whatever it is now,” Turner said. “From what I’ve been hearing from my constituents, they don’t know it’s been reduced anyway because it’s not making a difference in whatever they buy.”
Overall, the speech was received predictably by the Legislature. Republicans were critical, though they hold only 35 percent of the seats in the Senate and Assembly. The majority Democrats were decidedly noncommittal, with some saying there were too many tax hikes and leadership opting not to hold their traditional news conference after the budget speech.
Assembly Majority Leader Louis Greenwald, D-Camden, said “we shouldn’t have any discussion around taxes” until there’s a better understanding of how federal tax changes will affect New Jersey and a tax study task force continues its study of potential savings.
“I think it’s irresponsible for us to make a knee-jerk reaction to any one proposal from a revenue standpoint,” Greenwald said.
“It’s too many tax proposals. Too many increases,” Turner said. “We seem to have dueling tax increase proposals, and nobody has talked about how can we reduce the cost of government.”
Murphy said he is directing his Cabinet “to do deep dives into their own departments and agencies to find operational efficiencies” but didn’t detail any of those changes.
Assembly Minority Leader Jon Bramnick, R-Union, said the proposals would be bad for taxpayers and referenced the income and sales tax hikes Democrats adopted in 1990 under then-Gov. Jim Florio.
“I’ve seen this movie before. It was called Florio 1. Now we have Florio 2, the sequel,” Bramnick said. “They must have forgotten what happened after Florio 1 was shown to the New Jersey taxpayers.”
On the spending side, the budget calls for $37.4 billion in spending – 8 percent more than the budget signed last July by then-Gov. Chris Christie and 4.2 percent more than the current spending, updated with supplemental appropriations.
It includes $704 million more for the payment into public workers’ pension funds, $341 million in additional formula and preschool aid to schools, a $242 million increase in the state’s subsidy to NJ Transit and $50 million as a first step toward providing tuition-free community college.
“This is what New Jerseyans want to see,” Murphy said. “Let’s prove to them that their government can be both responsive and responsible, efficient and effective.”
Business groups said the tax proposals gave them pause, even if they were mostly expected.
“No surprises. I mean, they were promised in the campaign and I would have been shocked if they weren’t part of the mix,” said Tom Bracken, president and chief executive officer of the New Jersey Chamber of Commerce. “It’s not a positive. I don’t know how that promotes a stronger economy and how it prevents outmigration and all those issues.”
Bracken sounded least concerned about the tax proposal that was least expected, increasing the sales tax back to 7 percent.
“In all reality, if there’s any kind of tax increase that would have minimum impact on the citizens and the businesses of New Jersey and generate needed revenue, that’s it,” Bracken said.
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