On August 25, Governor Murphy delivered the revised FY2021 budget address at Rutgers University’s SHI Stadium. The $32.4 billion state budget consists of four mechanisms to help New Jersey recover from the economic effects of the COVID-19 pandemic: tightening expenses, raising revenues, borrowing and direct federal cash assistance.

As for savings, the Governor announced the budget includes nearly $1.2 billion in spending reductions, which the CCSNJ encouraged in advance of the address. However, despite these reductions, the budget still proposes $1 billion in new taxes, most of which will impact the business community.

In the address, Governor Murphy once again renewed his call for extending the personal income tax rate – otherwise known as the “millionaire’s tax” - on those whose incomes fall between $1 and $5 million annually from 8.97 percent to 10.75 percent. This is the fourth attempt at increasing this tax, which has never been adopted by the legislature since Governor Murphy took office.

In addition, the proposed budget eliminates a tax break on boat sales, which cut the sales tax in half and capped it at $20,000.This will put New Jersey at a competitive disadvantage to neighboring states, particularly in South Jersey, where consumers can simply look to neighboring Delaware.

Other tax increases include levying new assessments on opioid drug manufacturers and wholesalers, permanently incorporating the 2.5 percent corporation surcharge, restoring the sales tax on limousines, and applying a 5 percent surcharge to high-income individuals with federally Qualified Business Income (QBI) who have benefited from a new deduction for pass-through entities created under the 2017 federal Tax Cuts and Jobs Act.

Included in the revised budget and as expected, Governor Murphy proposed borrowing $4 billion. The CCSNJ remains concerned that the longstanding impact of any borrowing will add to the state’s already enormous debt, which can only lead to higher taxes on already overburdened residents and businesses.

Governor Murphy also proposed to launch a statewide “Baby Bonds” initiative, which will provide a $1,000 deposit for the approximately 72,000 babies born in 2021 into families whose income is less than 500 percent of the Federal Poverty Level, or $131,000 for a family of four. As proposed, once these residents turn 18 they would be able to withdraw the funds to help pursue college, buy a home, start a business, or pursue other wealth-generating activities.

The Governor once again called on Congress to pass direct federal cash assistance to states and local governments to prevent the recession from falling into a depression.

CCSNJ President & CEO, Christina M. Renna released the following statement regarding Governor Murphy’s revised FY2021 Budget:

“So much has changed for the struggling business community and the workers they employ since the start of the pandemic, however today made clear that Governor Murphy does not see it that way. Tax increases are rarely a good idea, but they are particularly unwise when imposed during tough economic times. Specifically, tax increases, such as the so-called “millionaire’s tax”, have widespread implications for the economy given those individuals tend to be investors, entrepreneurs, micro-businesses and sole proprietors – the exact individuals driving the “Innovation Economy” the Governor has long touted as a cornerstone of his Administration. The CCSNJ looks forward to vigorously weighing in on the proposed budget and working to identify more responsible options outside of tax increases that can help balance the state’s budget in the coming weeks.”

To read Governor Murphy’s Budget Address, click here.

For a summary of the Governor’s budget proposal, please click here.

Please reach out to Hilary Chebra, Manager, Government Affairs at hchebra@chambersnj.com if you have any questions.