Murphy puts budget compromise with Democrats on table

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6abc's Walter Perez sits down for an exclusive interview with New Jersey Governor Phil Murphy, as seen on Action News at 6 p.m., June 26, 2018. (WPVI)

Gov. Phil Murphy put forward a new budget revenue proposal on Tuesday, merging his calls for higher taxes on the wealthy and a boost in the sales tax with the Legislature's idea for higher business taxes.

Murphy, a Democrat, praised the Democrat-led Legislature's efforts in crafting a budget that mirrored many of his priorities, including higher New Jersey Transit spending, a boosted public pension payment and increased school aid. But he also pointed out a key stumbling block: what he says is a need for more tax revenue.

Murphy, who wrote a letter to lawmakers just days ahead of Saturday's budget deadline, proposed a hike in the state's 9 percent corporate business tax, though he didn't specify to what rate. He also put on the table a "modest" increase in the income tax for those earning more than $1 million, as well as a two-year phased-in hike on the sales tax. The rate would go from 6.625 percent to 7 percent.

"I believe this compromise fairly balances our mutual concerns while strengthening our fiscal foundation. Moreover we will restore value and fairness to New Jersey," Murphy wrote.

The letter, which was sent to reporters, arrived around the time a meeting that Murphy hosted with lawmakers was ending. Legislators, including Senate President Steve Sweeney, declined to talk about their discussions with the governor. Sweeney and Assembly Speaker Craig Coughlin later said in a statement that they're reviewing the governor's offer.

"We will give his offer full consideration, along with other options we are evaluating," they said.

They didn't specify what the other options were.

Murphy's latest proposal is a change for him, and incorporates the Legislature's call for a higher business tax.

Under the Legislature's budget, the corporate business tax would climb from 9 percent to 11.5 percent for firms making from $1 million to $25 million, and to 13 percent on businesses earning more than $25 million. The hikes would expire after two years.

Murphy seemed to rule out the 13 percent level, which would mean New Jersey has the highest business tax in the nation, topping Iowa at 12 percent.

"This surcharge must be at a rate that does not make New Jersey an outlier nationally, as the bill on my desk currently would," he wrote.

Murphy had initially sought to raise the income tax on a millionaire from 8.97 percent to 10.75 percent, in addition to the sales tax hike to 7 percent, though his earlier proposal made that change immediately, and not over time.

He also said he would accept Assembly Speaker Craig Coughlin's proposal to increase funding for a property tax rebate program, along with an increase in school funding supported by Sweeney. In another change, he said he is willing to accept nearly $200 million in "savings and efficiencies," as well as a one-time tax amnesty. He earlier indicated he would not sign onto what he called "one-shot" revenue infusions like those.

New Jersey's Democrat-led state government has been clashing over which taxes to raise ahead of a requirement to enact a balanced budget. If an agreement is not reached, then New Jersey's government faces a shutdown.

The major sticking point has been revenue, with Murphy saying he cannot certify the tax receipts that lawmakers relied on in their budget.

"We're still a number of days out and I am still optimistic we can get to a good place," said Murphy.

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