TRENTON — With a budget deadline hours away, Gov. Phil Murphy on Friday said he'd be willing to back down from raising the state sales tax in a compromise offer to Democratic legislative leaders.

Both sides of the same party remained at loggerheads Friday evening despite both sides claiming to have budged on their positions. It appeared that the state fiscal year would begin Sunday with no spending plan in place, although it remained to be seen whether Murphy would shut down the government.

Democratic lawmakers budged a bit on one of Murphy’s priorities that they had resisted — a hike in income taxes for the rich. But Murphy, who wants a rate of 10.75 percent on income over $1 million, rejected the offer to impose a 9.95 percent tax on incomes over $5 million instead.

Murphy said the offer was initially viewed as “a glimmer of hope” but that it would generate around $160 million a year in tax revenues, compared with his proposal’s $774 million.

“This was soon found to be only a symbolic thought,” Murphy said.

In Murphy's letter, he offered to raise income tax to 10.75 percent for people making more than $1.75 million. This would raise $550 million a year.

Lawmakers revamped their corporate tax surcharge plan, saying it would start at 3 percent then step down gradually after four years before disappearing. Murphy seemed to indicate that he’d be willing to do a 2 percent surcharge.

Sweeney said “that’s where the money fell from heaven” in the federal tax cuts and doesn’t know why Murphy won’t tax what he estimates as a $2.9 billion windfall.

“He is more concerned about protecting corporations that had billion-dollar windfalls from Donald Trump – because that’s what he wants to do,” Sweeney said. “He wants to keep reducing the amount of revenue from them, but he would rather raise taxes on the people of the state of New Jersey. Enough.”

Murphy's letter said he'd be willing to impose a corporate business tax surcharge of 2 percent on average for four years, which would raise $320 million a year.

"Contingent upon getting the right balance between the CBT and the millionaries tax, and continuing our shared priorities of asking the wealthiest residents and corporations to pay their fair share, I am prepared to take the restoration of the sales tax to 7 percent off the table," Murphy's letter says.

On Friday, Sweeney and Assembly Speaker Craig Coughlin, D-Woodbridge, said Murphy had been unwilling to compromise.

“If our state government is facing a shutdown,” Sweeney said, “it’s because the governor believes negotiations consist of one side not budging until the other bends.”

“There’s a game, and I keep telling my friends this,” Sweeney said. “He wants to run the clock. I guess he feels that if there’s a lot of pressure that he would get his way.”

Lt. Gov. Sheila Oliver, a former Assembly speaker, said legislative leaders were misrepresenting the negotiations.

“In the 15 years, 14 as a legislator, and now the past five and a half months as lieutenant governor and commissioner of a department, I have never seen the level of obstructionism come from the legislative leadership as I am seeing in this cycle,” Oliver said.

Murphy convened a Cabinet meeting Friday night to discuss issues include a potential shutdown. He didn’t provide details about what might shut and when.

In his letter, Murphy said "time is of the essence" and he called on "reasonable heads to prevail."

The Assembly is holding a voting session Saturday.

 

Michael Symons contributed to this report.

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