In his first budget address Tuesday, Gov. Murphy proposed a tax on millionaires — one of many proposals aimed at funding investments in pensions, schools, and transit.
"Yes, a millionaire's tax is the right thing to do — and now is the time to do it," the Democratic governor told legislators in Trenton.
Murphy said raising the state income tax rate for residents who earn more than $1 million would bring in $765 million this calendar year.
New Jersey residents would pay a new 10.75 percent marginal tax rate on any income above $1 million. The top tax rate is currently 8.97 percent, for income over $500,000.
The state Treasury Department said the tax would affect about 20,000 New Jersey residents and 19,000 nonresident New Jersey taxpayers.
"The people of New Jersey are with us on the millionaire's tax, as they want us to restore the value they get out of the tax dollars they entrust to our care," Murphy said in his budget address.
That claim — and the concept of taxing millionaires — is not new for Murphy. It was central to his campaign last year.
But after Murphy was elected in November, Congress passed a new federal tax plan that will impact homeowners in New Jersey by capping deductions for state and local income taxes. The federal tax plan caused Senate President Stephen Sweeney (D., Gloucester), to back off his support for a tax on millionaires — which could throw into question the fate of Murphy's proposal. Sweeney has proposed an increase in the corporate income tax.
Opponents of a tax on millionaires also say it would make the state less competitive and would deter high-earning individuals from living there. Andrew Sidamon-Eristoff, a former New Jersey state treasurer, criticized both Sweeney's and Murphy's approaches in a recent op-ed on NJ Spotlight.
"As tax hikes, the two proposals nonetheless share a defining negative characteristic: In the special context of state tax policy, they are both notably more anticompetitive than many of the available alternatives," he wrote.
Several other states have taxes on millionaires. New York has a tax rate of 8.82 percent for single taxpayers who earn more than $1 million and married couples earning more than $2.1 million. California, Connecticut, and the District of Columbia also have higher income tax rates for incomes over $1 million. Pennsylvania doesn't; it imposes a flat 3.07 percent income-tax rate.
A tax on millionaires is just one of Murphy's proposed tax changes and hikes.