TRENTON, N.J. — New Jersey has a new $37.4 billion budget that ratchets up taxes on the very wealthy and some businesses, expands some tax breaks and increases spending on schools and mass transit.
Democratic Gov. Phil Murphy, in his first year as governor after a career on Wall Street and a job as President Barack Obama’s ambassador to Germany, signed the agreement just before midnight on Sunday.
A closer look at what’s in the budget:
WHOSE TAXES GO UP?
Income taxes for those making more than $5 million will see their rates increase from 8.97 percent, which is levied on income of $500,000 and above, to 10.75 percent. Murphy estimates that will bring in about $280 million to state coffers from roughly 1,800 taxpayers.
Businesses that make more than $1 million will also see their rates climb over the next four years. For the next two years, the rate on those corporations will go from 9 percent to 11.5 percent. For the final two years, it will drop back to 10.5 percent before expiring after the fourth year. The changes are expected to bring in $425 million to the treasury for the fiscal year that started Sunday.
The budget also includes a so-called combined reporting provision that aims to capture revenue from companies that earn money in the state but previously parked it in other states for tax purposes, along with other business tax changes that Murphy valued at about $400 million this fiscal year.
The budget also includes a number of smaller fee increases. Ride-sharing will now be taxed at 50 cents per ride or 25 cents on shared rides. The liquid nicotine used in e-cigarettes will be taxed at 10 cents per milliliter, and lodging obtained through services like Airbnb will now be subject to the state sales tax of 6.625 percent.
WHICH TAXES AREN’T GOING UP?
Most income-tax filers won’t see their taxes raised.
The sales tax will remain at 6.625 percent, rather than rising to 7 percent as Murphy had wanted.
ARE ANY TAXES GETTING CUT?
The budget doesn’t cut rates on any of the state’s major taxes — income, sales and business. But it does include roughly $300 million for a property tax rebate program that benefits about 600,000 taxpayers, double the amount provided under the last budget.
The spending plan also includes several other tax breaks: Income tax filers who itemize deductions can now deduct $15,000 in property taxes instead of just $10,000. The Murphy administration says that would benefit about a half-million filers, at a cost to the treasury of about $82 million for fiscal year 2019.
The budget also increases the earned income tax credit, which currently benefits about a half-million low-income filers. The budget increases New Jersey’s credit from 35 percent of the value of the federal earned income credit to 40 percent by 2020. The change is expected to cost $27 million.
A new child care tax credit also allows those making $60,000 or less a year to claim an allowance worth up to 50 percent of a similar federal credit.
WHAT’S HAPPENING WITH SCHOOL FUNDING?
The budget puts aside about $400 million in additional funding for pre-K-12 education. Funding for kindergarten through 12th grade is roughly 4 percent higher than it was under Republican Gov. Chris Christie’s final budget.
The spending plan scraps decade-old limits on how much aid school districts could gain or lose. School districts whose state aid has not kept up with growing enrollment over the years would be the main beneficiaries. Lawmakers estimate nearly 400 districts will see state aid go up while around 200 would see funding go down. The state has about 600 school districts.
The deal also includes $25 million to help fund community college tuition for students from households with earnings under $45,000, aid that Murphy had promised to pursue during his campaign.
IS MASS TRANSIT GETTING MORE AID?
The budget increases operation subsidies for New Jersey Transit by $242 million, to $383 million. Murphy campaigned on a pledge to reinvest in transit, which Christie cut through the years. Fare hikes were not part of the budget.
IS THE STATE PENSION CONTRIBUTION INCREASING?
Yes. How much to contribute to the state pension funds has been a perennial source of conflict. Murphy agreed to continue with the payment schedule he inherited, putting $3.2 billion in the public worker retirement funds, up from $2.5 billion in fiscal year 2018.