Under intense pressure from the legislature’s top Democrats, Gov. Phil Murphy in his budget address Tuesday won't propose any broad-based tax increases for Fiscal Year 2020, according to sources with knowledge of the negotiations.

He'll also avoid proposing fare hikes on New Jersey Transit and a toll hike for the New Jersey Turnpike. Murphy had sought raising the sales tax back to 7 percent and perhaps broadening it to include items currently not taxed.

The sources say Murphy has demanded a hike in the millionaires’ tax in exchange for leaving other tax hikes off the table. However, a spokesman for Senate President Steve Sweeney told New Jersey 101.5 there is no deal, and Sweeney has not agreed to expanding the millionaires’ tax.

Assembly Speaker Craig Coughlin appears more willing to go along with that deal framework, according to the sources. Sweeney and Coughlin agreed to a higher tax rate on those earning more than $5 million to end a budget stalemate last year.

In recent days, Sweeney and Coughlin have both told the governor there was zero support for broad-based tax hikes, including the increase in the sales tax, the sources say. Coughlin is especially concerned about the impact of any tax hikes on his members who face re-election in the fall.

Sweeney has also been insisting on significant savings on pension and health benefit costs for state workers, according to the sources. Murphy will announce a new deal with state workers in his budget address. The Star Ledger is reporting close to a billion dollars in savings in the contract deal Murphy just reached with the Communications Works of America, which represents a large number of state employees.

There are some concerns in the legislature that number may not be real, and some members also want Murphy to pressure the New Jersey Education Association (the teachers union) to agree to similar concessions for its members.

Murphy is hoping for close to half a billion dollars in new revenue by taxing incomes over one million dollars at a higher rate, according to those close to the negotiations. He will also tout departmental audits that will save taxpayers more than $200 million. The only other specific tax increase Murphy will propose targets the maker of prescription opioid medication. Murphy believes that combination will bridge an estimated $2 billion budget gap.

There is still a lot of work to do before the budget is signed into law for the 2020 fiscal year that begins July 1, but Murphy’s proposal avoid broad-based tax hikes, for now.  However, Murphy missed badly on revenue projections in his 2019 budget and if he misses on projections again, tax hikes could be back on the table. These proposed tax hikes are also likely to be included in the 2021 state budget when lawmakers are not concerned with re-election.

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