Gov. Phil Murphy wants a tax hike on millionaires.

State Senate President Steve Sweeney wants pension and health benefits reforms.

These two issues will likely comprise the biggest fight yet between the top two elected Democrats in New Jersey.

The state Senate president has repeatedly refused to consider Murphy’s tax hike, and said he would do so again, UNLESS Murphy considers structural changes to the pension and health benefits for public workers. Murphy, who has the strong support of public worker unions and will need their money for his assumed re-election bid, has repeatedly resisted those changes. Sweeney, like Murphy, has been undeterred.

In his State of the State address, Murphy linked more school funding and lower property taxes for the middle class to a hike in the millionaires’ tax:

Sweeney has similarly linked his reforms to lower property taxes. Just this week, the legislature voted to form a permanent ‘Economic and Fiscal Policy Review Commission” to address many of the reforms laid out in Sweeney’s “Pathway to Progress” report.  Public worker pensions are among the first issues they are expected to address, including a new hybrid retirement plan that more closely resembles a private sector 401k and ditching the current defined-benefit pension plan for workers with less than five years of service.

Make no mistake, much of this is personal. Murphy and Sweeney don’t like each other.  Murphy, with the support of the New Jersey Education Association teachers’ union tried to take Sweeney out. He’s attacked Sweeney’s strongest political ally, South Jersey power-broker George Norcross. However, Sweeney may have the upper hand on this issue. The legislature has a power the governor does not. They can place issues directly on the ballot for a public vote, and do not need the governor’s approval to do so. Sweeney has already indicated he is keeping that option open when it comes to pension reforms. Murphy cannot do that with a millionaires’ tax hike.

With Murphy likely to introduce a budget that includes the increased tax on New Jersey’s wealthiest next month, and a new budget needing to be adopted by July 1, expect these two issues to get considerably more contentious in the weeks ahead.

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