Murphy sends Democrats new budget offer as deadline nears

TRENTON, N.J. -- Hours before of a looming budget deadline and amid stalled talks with Democratic legislative leaders, New Jersey Gov. Phil Murphy on Saturday sent lawmakers a new tax revenue offer aimed funding government and avoiding a shutdown.

Murphy said in a letter to Senate President Steve Sweeney, Assembly Speaker Craig Coughlin and lawmakers that he would take off the table his proposal to hike the sales tax. He's also increased the income threshold on a proposal to hike rates on millionaires and indicated he backs a business tax hike.

It's the latest proposal in a more than weeklong negotiation amid the state's Democratic leaders over the proposed nearly $37 billion budget. Much of the debate has centered on how much to raise taxes to pay for higher school funding, transit subsidies and the public pension. Murphy has made a tax on income over $1 million - a key campaign promise backed by progressive organizations and labor - a sticking point.

Lawmakers worry millionaires would flee the state, and instead sent Murphy a $36.5 billion budget paid for in part by a tiered hike in the tax on business, which they say firms can afford because of the federal tax cuts.

If lawmakers and Murphy fail to enact a balanced budget by midnight, the state faces a government shutdown, which would lead to public parks and beaches, as well as the Motor Vehicle Commission, closing. Racetracks would also close, according to a letter from the state attorney general. Tollbooths and emergency services, as well as casinos, would stay open.

Under Murphy's latest proposal, the income tax on people making more than $1.75 million would climb to 10.75 percent from 8.97 percent under current law. He would also support a business tax that raises the rate over four years by 2 points from 9 percent to 11 percent. Previously, he proposed levying an income tax hike on those making more than $1 million. He initially did not seek any hike in the business tax.

He also says he would take his proposal to raise the sales tax from 6.625 percent to 7 percent off the table "contingent on getting the right balance" between the business and income taxes.

Lawmakers have opposed raising that tax.

Murphy also poured cold water on the lawmakers' latest offer from Friday to raise rates on people earning $5 million and above from 8.97 percent to 9.95 percent, saying it "gets us nowhere near where we need to be."

Lawmakers didn't immediately respond to requests for reaction to the governor's latest proposal.

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