By Kate King
TRENTON, N.J. -- New Jersey Gov. Phil Murphy will propose raising the state sales tax back to 7% to help support an increase in funding for public schools, public-employee pensions and higher education, administration officials said Tuesday.
In addition to the sales-tax increase, Mr. Murphy, a Democrat who took office in January, will propose higher income taxes on the state's millionaires and businesses. He is seeking to pay for a $37.4 billion spending package, which represents a 4.2% spending increase over this fiscal year's budget, Acting Treasurer Elizabeth Muoio said Tuesday ahead of the governor's budget address.
The proposed budget asks the legislature to undo a key component of the eight-year transportation funding package lawmakers struck with former Gov. Chris Christie in 2016, which reduced the state sales-tax rate to 6.625% from 7%. That increase is estimated to generate $581 million this fiscal year, Ms. Muoio said.
"To many taxpayers, this was not a significantly noticeable amount," Ms. Muoio said, referring to the lower sales-tax rate. "But it made a major hit to our general-fund revenues and prohibited us from being able to make significant investments in New Jersey's future."
The governor also proposes a 10.75% state tax on income over $1 million, which his administration projected would bring in $765 million in revenue for the state. The current top income-tax rate in New Jersey is 8.97% for income over $500,000. A series of proposed changes to the way New Jersey taxes its businesses, including combined reporting, would bring in an estimated $110 million in revenue, Ms. Muoio said.
In all, Mr. Murphy's budget assumes a 5.7% increase in revenue.
The proposals are in line with many of the governor's campaign promises, including implementing a tax on millionaires. Mr. Murphy also said he would fully meet the state's public-school and public-pension obligations, and his proposed budget outlines a plan to fulfill those pledges by 2023.
Mr. Murphy's proposed budget would put the state on track to fully fund the school funding formula within four years, Ms. Muoio said.
The state would also make a $3.2 billion public-pension payment under the proposed spending plan, with the intention of meeting the actuarially recommended contribution by 2023.
Mr. Murphy's proposed budget also includes a $57 million increase for prekindergarten programs and $50 million in additional funding for community colleges, which is expected to provide tuition assistance to 15,000 students.
The governor will deliver his budget address to state lawmakers Tuesday afternoon.
New Jersey Assemblyman Jon Bramnick, a Republican, said he was shocked by the governor's proposal and would try to block tax increases. Democrats control the state legislature.
"This is going to force more middle-class New Jerseyans to flee the state," Mr. Bramnick said. "Now it is up to the majority in the legislature to stop this plan."
Write to Kate King at Kate.King@wsj.com
(END) Dow Jones Newswires
March 13, 2018 14:31 ET (18:31 GMT)
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