EDITORIAL: Bold tax reform proposal changes debate
Gov. Murphy's tax policy reflects shifting national discourse
Brinksmanship over taxes and the state budget brought New Jersey within inches of a state government shutdown last year. Gov. Phil Murphy (D-N.J.), after winning a decisive victory on a progressive platform, looked to fulfill his campaign promise of raising the marginal tax rate on those who make $1 million in a year.
Party divisions forced Murphy to compromise in the final hour, settling on a budget proposal that raised “the income tax to 10.75 percent on those earning over $5 million and taxes businesses making more than $1 million at a new rate of 11.5 percent, up from the current 9 percent, but phases that increase out over four years,” according to NJ Advance Media.
With the state’s financial problems left unsolved, Murphy is once again putting the proposal forward to set the threshold for the marginal tax rate of 10.75 percent on the first dollar over $1 million and the specter of potential state government shutdown looms large once more. The proposal is estimated to bring in a tax revenue of $447 million for New Jersey, which would go toward financing “K-12 education, pre-kindergarten, government worker pensions, transit, community college and help for the working poor," according to NJ Advance Media.
Approximately 39,000 taxpayers — 20,000 of which are residents — would have to contribute to state funds under the tax proposal, an increase from the 1,760 taxpayers who are now paying more under the current $5 million threshold. With state assembly elections slowly approaching, Senate Democratic leaders have not indicated a shift in position since last year’s negotiations. A major difference between this year and last is the national context of progressive taxation.
The debate over income inequality and this nation’s undermined middle-class has gripped the Democratic Party, forcing politicians to not only announce their commitment to reviving economic mobility, but also to actually propose policies that allow for investments in the middle and lower-class.
In his announcement of the proposal on Tuesday, Murphy said, “Those at the very top are shouldering less and less of their fair share of the tax burden. That’s the opposite of tax fairness. Let’s work together to apply the millionaire’s tax to every millionaire. By doing so, we can do more to relieve the burden on middle-class taxpayers and senior citizens who are taking it on the chin from the (President Donald J.) Trump administration’s tax scam.”
Whether it be Rep. Alexandria Ocasio-Cortez’s (D-N.Y.) marginal tax rate of 70 percent on those with an income exceeding $10 million, or Sen. Elizabeth Warren’s (D-Mass.) ultra-wealth tax of 2 percent on a household’s assets more than $50 million and 1 percent on those over $1 billion, or New Jersey’s very own Sen. Cory Booker’s (D-N.J.) 10-percent surtax on estates worth $10 million to $50 million, the conversation has tilted and the starting point of our national debate over how much the ultra-wealthy should contribute to the public has moved.
Roughly 75 percent of Americans favor higher taxes for the ultra-wealthy. An Eagleton Institute of Politics poll in 2017 found that nearly two-thirds of state residents favored a tax on those with an income exceeding $1 million.
Those who consider increasing taxes at the top as a curtailment of economic growth would often rather see tax breaks in the hope that investments would then increase and the general improvement in the economy would raise everyone up. In line with this contention and with the hope of bringing businesses to the state, New Jersey has provided nearly $11 billion in tax credits to companies: The string attached being increased or retained levels of employment.
An audit of the program released this past January found that “in a small sample of the roughly 400 companies that have received tax breaks since 2005, for example, 1 in 5 jobs reported to have been created or retained could not be verified. One unnamed company received $29 million in tax breaks even as its employment level dropped,” according to NJ Advance Media.
Murphy’s tax reform sets our discourse off at a lofty level that will allow for the middle-class of the state to receive the emboldening benefits that result from confronting income inequality in America. A higher marginal tax rate on those with a reported income exceeding $1 million will not rip away their comfortable lives as millionaires in America.
The vast majority of Americans do not survive off of a passive income, nor do they or will they receive an income of $1 million in a year. While the discord between the governor and State Senate leaders will most likely end in a compromise, the lexicon of tax policy still shifts and the Overton window of acceptable and sensible policy moves to favor progressive tax reform.
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