New Jersey Governor Phil Murphy (D) has proposed $1.5 billion in tax hikes in his first-ever annual budget. The hikes target everything from ridesharing (Uber, Lyft) and electronic cigarettes to increasing the state sales tax, corporate, and income tax. Just as federal tax reform is taking effect, the last thing New Jersey residents need is for those savings to be confiscated through Trenton’s high tax policies.
Here are a few of the more egregious of the $1.5 billion in tax hikes:
A $581 million tax increase through raising the state sales tax to 7.0%. This sales tax hike would disproportionately fall on low and middle-income Americans, since they spend a higher proportion of their budgets on everyday goods and services. The Institute of Taxation and Economic Policy estimates this budget difference results in lower and middle income Americans paying 4.7%-7% of their income on consumption sales taxes, compared to only .8% for upper income Americans.
A $110 million tax on businesses, including on one time funds repatriated back to the United States from abroad under federal tax reform. The costs of the business tax will be passed on to consumers, adding to the burden from the sales tax increase. Moreover, business funds have been held overseas because of the stiff tax penalty of bringing the funds back to invest in the United States. By increasing this tax penalty in the wake of its reduction in federal tax reform, Governor Murphy is increasing the likelihood these funds remain overseas permanently or are repatriated to another state with a more favorable tax climate.
A tax on e-cigarettes that is to be determined. The tax comes at a time when the international consensus is that e-cigarettes are 95% safer than traditional combustible cigarettes and help transition smokers away from more dangerous traditional cigarettes. Increasing e-cigarette prices through taxation only makes it harder for smokers to quit traditional cigarettes.
A to be determined tax on ridesharing services, such as Lyft and Uber. This tax will only serve to make transportation more expensive for New Jersey citizens simply trying to move from point A to point B.
A $765 million income tax hike. The proposal would raise the top marginal rate to 10.75%. This increase would continue to cause middle and upper-income residents to flee to friendlier tax territories, resulting in lost revenue to the New Jersey state government. Over the past several decades, New Jersey has lost more than 500,000 people with annual income exceeding $35 billion. This tax hike is double punishment for residents no longer able to write off more than $10,000 in state and local taxes as a result of federal tax reform.
Especially troublesome is that several of these tax hikes are to be determined. Their status demonstrates the intent is not to fund important budget priorities, but to raise funds for unannounced pet projects of Governor Murphy. Rather than continue to push residents to flee New Jersey through its enormous and punitive tax burden, Governor Murphy would be wise to provide real tax relief to New Jersey residents.