During his characteristically exuberant budget address last Tuesday in Trenton, Gov. Phil Murphy made a new pitch for a “millionaire’s tax” — an additional levy on the portion of annual incomes that exceed $1 million. About 22,000 full-time Garden State residents would see their tax bills rise if the governor’s proposal becomes law.
This is not a new idea. Murphy has already twice tried and failed to get the legislature to sign on, but N.J. Senate President Steve Sweeney recently shifted his position. Polls show 72% of New Jerseyans supported a millionaire’s tax in 2019; more than half of all Americans agree that wealthy people and corporations pay too little in taxes. And with income inequality a major and growing concern, a millionaire’s tax is gaining traction.
Murphy predicted the millionaire’s tax will raise $494 million to support the proposed, biggest ever, $40.9 billion spending plan for the fiscal year that starts July 1. The new budget calls for an overall spending increase of about $2 billion, or 5%, over the current budget; the governor insists the new revenue will mostly help offset property taxes and support education. The new money should also free up additional revenue for priorities such as the problem-plagued New Jersey Transit, as well as the state’s chronically underfunded pension system.
Like most Americans, we support tax fairness. We also support this tax in particular.
New York, Connecticut, Maine, California, and Washington, D.C. already impose a higher marginal tax rate on annual incomes over $1 million, and New Jersey imposes a higher marginal rate on those earning more than $5 million. The latest plan calls for boosting the marginal tax rate on incomes over $1 million from 8.97% to 10.75%. Still, a “tax the rich” strategy is not without risk, according to a 2019 study by Moody’s, since high earners have incomes that can be dramatically reduced due to stock market fluctuations.
While the state’s proposed millionaire’s tax gets all the attention and is intended to take some pressure off property taxes, the confiscatory rates that extract money from homeowners across New Jersey don’t get directly addressed.
The notion that millionaires and nonmillionaires alike are fleeing the state in droves is difficult to prove or disprove. But it’s indisputable that New Jersey’s property taxes are among the nation’s highest, and are an ever-heavier burden: The average annual bill doubled between 1999 and 2019. In his budget address, Murphy said property taxes are “stabilizing.” But rebates, senior citizen discounts, and the offsets from new revenue are not the sort of genuine tax relief homeowners need.