New Jersey Gov. Phil Murphy and other top lawmakers said Thursday that they would raise taxes on those who earn more than $1 million a year and send tax rebates of up to $500 to hundreds of thousands of families, hailing the announcement as a victory for the middle class.

The deal is a major political win for Murphy, who campaigned on a progressive platform and has proposed the “millionaires tax” for years, but was stymied by lawmakers in his own party.

“We do not hold any grudge at all against those who have been successful in life,” Murphy said at a Thursday morning news conference in Trenton, flanked by Lt. Gov. Sheila Oliver, Assembly Speaker Craig Coughlin, and Senate President Stephen Sweeney. “But in this unprecedented time, when so many middle-class families and others have sacrificed so much, now is the time to ensure that the wealthiest among us are also called to sacrifice.”

Sweeney, who had resisted the tax in recent years, acknowledged that his turnaround was a surprise to some.

“I bet a lot of you didn’t expect to find me here today," he said during Thursday’s announcement. “And you know, I’m surprised I am.... But the pandemic hit, and things have changed. And we have to face the reality that a lot of families are hurting.”

Murphy and Sweeney credited Coughlin with moving the plan forward this week. Murphy said the proposal will “undo years of tax inequities” that have resulted in some middle-class and poor families paying a higher percentage of their income in taxes than wealthier taxpayers.

In an interview after the news conference, Murphy said he believed he would have gotten the tax approved at some point, regardless of the economic climate. But he acknowledged the financial devastation caused by the coronavirus made it more politically palatable.

“Asking the wealthy to pay a few more pennies is a formula that makes sense and works, whatever your environment is," he said. “But did it make the case for it even more compelling? I think the answer has to be yes. The middle class has been hurt so badly.”

Under the plan, the tax rate will increase from 8.97% to 10.75% on annual income of more than $1 million — the same rate that currently applies only to income above $5 million. The deal will also give tax rebates of up to $500 to families that have at least one child and earn less than $150,000, or less than $75,000 for single parents.

The proposal is likely to be approved by the Democratic-controlled legislature by month’s end as part of the state budget plan. The tax would go into effect after the budget is adopted, while rebates would be based on next year’s tax filings.

The plan is expected to raise an estimated $390 million, with the rebates costing more than $300 million. Murphy said that the revenue will represent an “investment” in the middle class, and that any leftover money would be put into school funding, health care, housing, and more.

Lawmakers will revisit whether to continue the rebates next year, but Murphy said he would like them to be issued annually. Officials said 700,000 to 800,000 families are eligible.

The four Republican members of the Senate Budget and Appropriations committee issued statements denouncing the deal as bad economic policy. Sen. Michael Testa called the deal “an election-year stunt.”

“Hundreds of millions of dollars in higher taxes will be collected over the next fiscal year, but none of the benefits the governor is promising will be paid out until he’s in campaign mode next summer,” said Testa, who represents Cape May County and parts of Atlantic and Cumberland Counties, referring to Murphy’s expected run for a second term next year. “He’s looking to buy his reelection with your money.”

State lawmakers have been deadlocked for years over the millionaires tax, which was approved several times by a Democratic-controlled legislature under Republican Gov. Chris Christie. Christie vetoed the tax each year.

Raising taxes for the wealthy was one of Murphy’s campaign pledges, and he has proposed the tax three times, most recently in his budget address this year.

But the legislature has twice rejected the tax since Murphy took office, saying President Donald Trump’s federal tax overhaul had already slammed the state’s residents through the loss of property tax deductions.

The New Jersey Business and Industry Association criticized Thursday’s announcement, saying in a statement that the proposal is undermined by toll and gas hikes, and other taxes included in Murphy’s proposed budget.

“Our taxpayers need real tax reform that includes property tax relief, while this does not really improve our overall affordability crisis or remove us from the edge of our fiscal cliff,” the group said in a statement.

The hike would offset part of what Murphy has said is a projected $5 billion shortfall in revenue compared with the budget he scrapped earlier this year in the wake of the pandemic. In his August budget address, Murphy also proposed hiking cigarette and business taxes, among other increases. Murphy has been authorized to borrow up to about $10 billion to balance the budget.

Murphy and lawmakers previously agreed to extend the current fiscal year from June 30 to Sept. 30, and said Thursday that the budget would be finalized before that deadline.