Phil Murphy made no secret of his intention to raise taxes when he was running for governor in 2017 while aggressively promoting his progressive agenda.  Fellow Democrats have largely rejected his plans to raise taxes and blunted many of his initiatives in the legislature.

Murphy’s resolve will be tested over the next 13 days as lawmakers send him a budget that does not include the tax hikes he has demanded, according to sources familiar with the proposal.

Senate President Steve Sweeney and Assembly Speaker Craig Coughlin have been steadfast in their opposition to Murphy’s millionaires’ tax hike, and the sources say the legislative leaders have not included it in their spending plan. They have also rejected Murphy’s plan to impose a $150 per employee tax on businesses that fail to provide health insurance to their workers. Instead, taxes paid by HMOs in New Jersey would be increased.

The legislature’s budget will also not include higher taxes and fees on guns and ammunition, one of the sources said. Sweeney had previously said on New Jersey 101.5 he believed there was already enough gun regulation in New Jersey. And the budget will also include less of a rainy-day surplus than Murphy had wanted.

Sweeney, Coughlin, and Murphy had a rare face-to-face meeting last week where the Speaker and Senate President made it clear they would not be including tax hikes on the wealthy, corporations and gun owners, the sources said. They also sought to assure Murphy they would still find the money to fund Democratic priorities without the tax hikes. The governor left that meeting without indicating what he would do next, although he insisted all options were still on the table, the sources said.

Publicly, Murphy has continued to push for “tax fairness” in a series of TV ads funded largely by public sector unions. Those same unions sent thousands of members to the State House last week in protest of Sweeney’s proposed pension and health benefits reforms and in support of Murphy’s tax hikes. While some Democratic caucus members have publicly said they would vote ‘yes’ on a  millionaires tax if it was presented (it wont be), they have not publicly sided with the Murphy plan, and will vote for their leadership’s spending plan this week.

With a budget likely on Murphy’s desk by week’s end, what he does with it will determine whether there will be a government shutdown on July 1. Murphy could sign the budget, and still publicly proclaim victory. Despite not including his proposed tax hikes, the budget is largely the same one he presented to the legislature and funds most of his priorities. He could line-item veto some items lawmakers have added to the budget.

The nuclear option would be to veto the entire budget. That would trigger a rancorous government shutdown that would be messy for all involved. Murphy will likely have about 10 days to decide if his millionaires’ tax hike is worth a shutdown. If that happens, it is difficult to see a quick resolution given how far apart Murphy and Legislative leaders are on the tax issue.

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