PISCATAWAY— Gov. Phil Murphy proposes to borrow $4 billion and raise taxes by $1 billion to balance New Jersey’s revamped 2021 budget.

The $32.4 billion, nine-month spending plan reflects $1.25 billion in cuts. It is forecast to conclude next June with a surplus of $2.24 billion, which would be far and away the state’s largest-ever cushion but is seen as a hedge against an uncertain economy and the prospect of a second COVID-19 wave.

School aid is flat, meaning it remains at the reduced levels announced in June. Funding for the homestead benefit and Senior Freeze that had been slashed in June are restored. A “baby bonds” initiative modeled after a federal plan by U.S. Sen. Cory Booker would provide $1,000 to most babies born in the state in 2021.

Murphy first proposed the budget in February, shortly before the coronavirus pandemic plunged state finances into their biggest crisis since the Great Depression 90 years ago. The state OK’d a three-month stopgap budget in June and has until the end of September to enact a nine-month spending plan.

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Some of Murphy’s tax-increase plans carry forward from his February plan:

Hike the tax rate on income over $1 million from 8.97% to 10.75%, which is already the rate on income over $5 million. This is the third year for that plan. It would be retroactive to January. The Treasury Department projects that would yield $390 million for the 2021, which is less than the $494 million it had projected before the pandemic.

Raise the tax on a pack of cigarettes from $2.70 to $4.35, starting Nov. 1. It would cost smokers $143 million over eight months, an annual rate of around $210 million.

Increase a series of gun-related fees and taxes for the first time since the 1960s to generate $6.3 million.

Other tax plans are new:

A 2.5% surcharge on corporate taxes is supposed to drop to 1.5%, but Murphy instead wants to make it permanent. The price tag on that is $210 million.

An assessment on health maintenance organizations, or HMOs, of 3% would increase to 5%, generating nearly $103 million.

Other tax plans are targeted at the wealthy:

A 5% surcharge on federally Qualified Business Income greater than $1 million who use a new deduction for pass-through entities, raising $75 million.

A restored sales tax on limousine services, raising $13 million.

And eliminating a cap on sales taxes for yachts and boats, raising $7 million.

"You don’t grow and strengthen the middle class by pulling the rug out from under it – you can’t cut and slash your way to growth and opportunity," Murphy said. "We will not go back to the New Jersey we inherited only two-and-a-half years ago."

Murphy called on the state's wealthiest "to sacrifice pennies on your top dollar to ensure that every New Jerseyan has the same opportunity to succeed that you did," tying the millionaire's tax to the issue of racial inequality.

"We must recognize that too many families of color pay a greater share of their hard-earned income in taxes than millionaires, who are overwhelmingly not people of color," he said. "Ensuring fairness and justice in taxation is just as important as ensuring fairness and justice in society — in fact, it is an essential step in eliminating the structural racism in our society."

Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at michael.symons@townsquaremedia.com.