Lawmakers Approve Tax Hikes; Budget Ready for Murphy to Sign
TRENTON — In what proved to be a marathon day of voting sessions – if marathons mostly consisted of sitting and standing around waiting – the Senate and Assembly voted Sunday to approve the state’s $37.4 billion budget and a slew of associated tax increases.
Gov. Phil Murphy was expected to sign the package into law as soon as Sunday night, more than 20 hours after the new fiscal year began without a spending plan.
The voting sessions didn’t end until around 11 hours after their scheduled start time, but each house actually was in session for about an hour. Most of the time, lawmakers were idled while administration and legislative staffers haggled over the details of the bills enacting the budget deal reached Saturday.
“I’m happy it’s over,” said Senate President Steve Sweeney, D-Gloucester. “I’m hoping that we can now move forward on a path where we can all realize that we can’t get anything done without each other and that we work together and make it a much different process than it was this year.
“This year was not a fun process,” Sweeney said. “It doesn’t have to be this hard, and I think that we all just want to be partners in this.”
The budget includes close to $1.4 billion in tax increases, not counting the $200 million in revenues expected from a tax amnesty offer that will be available later this year through which people can pay delinquent taxes dating back to Feb. 1, 2009 – at only half the interest due and without penalty.
Assembly Minority Leader Jon Bramnick, R-Union, said the Saturday night news conference where Murphy and Democratic legislative leaders celebrated their budget deal was “an insult.”
“Why would that turn into a party?” Bramnick said. “Giving each other five and hugging each other and smiling as if they just won a sporting event? What they did was increased taxes in New Jersey on the overtaxed people of the state of New Jersey. And the smiles were as wide and broad as I’ve ever seen.”
The biggest tax increase will hit corporations – an estimated $861 million. Of that, $425 million comes from a 2.5 percent tax surcharge on corporations with profits of over $1 million.
The rest comes from complex changes such as combined reporting, which looks at a company’s overall profits when calculating taxes, rather than its individuals units, and taxing the overseas cash brought back to the United States by corporations under a federal repatriation tax holiday.
Michele Siekerka, the president and chief executive officer of the New Jersey Business and Industry Association, said she was “concerned and disappointed” that combined reporting was approved and that the NJBIA opposed all the tax changes.
“The situation, honestly, is only getting worse for the business community,” Siekerka said.
“The consequences are that we become an outlier in the state of New Jersey,” she said. “You’ve heard us talk about outmigration a lot. Our concern right now on this is stagnation, not continuing to grow our economy because we’re just going to cease where we are and not put more investment in the state.”
Most of the day’s delays were about the combined-reporting changes to the Corporation Business Tax (CBT.)
Sen. Joseph Vitale, D-Middlesex, said it appears the CBT surcharge would apply to insurers, such as Horizon Blue Cross Blue Shield and New Jersey Manufacturers, who would simply pass the costs along to customers.
“It seems to me that this language could and may cause drastic premium increases,” said Vitale, who worried that would undermine a reinsurance pool recently enacted into law that he believes could cut health-insurance rates by 10 to 15 percent.
Sweeney said he didn’t think that would be the case, but that the new law could be altered in the months ahead if that proves not to be the case.
Income taxes are being increased by households earning more than $5 million a year. The tax rate on that money, now 8.97 percent, will increase to 10.75 percent, which is expected to yield $280 million in annual revenue to the state.
The state will begin taxing all online purchases Oct. 1, beginning to capture revenue from out-of-state retailers that haven’t had to collect and remit taxes on New Jersey sales. A recent Supreme Court ruling allows the expanded tax, which is forecast to net the state $188 million the first fiscal year.
And there are also smaller taxes and fees – on e-cigarettes, costing vapers $17 million a year; home-sharing rentals like those arranged through Airbnb, costing renters $15 million a year; and ridesharing services like Uber and Lyft, costing riders $12 million a year at 50 cents per ride.
The proposed 5-cent fee on single-use, carryout plastic and paper bags was not included in the budget, though the bill remains on Murphy’s desk for review.