In the spring of 2018, New Jersey’s new governor and leaders in the legislature were arguing about which state taxes to raise.  Governor Phil Murphy had pledged to soak the wealthy with a state individual income tax of 10.75 percent on all income more than $1 million, but powerful State Senate President Steve Sweeney preferred a tax increase on corporate income.

New Jersey narrowly averted a government shutdown on July 1, 2018, as Governor Murphy signed a budget compromise that will significantly increase taxes, but not to the extent that he wanted.  Overall, the budget is bad news for New Jersey residents and businesses.

Additionally, Governor Murphy had wanted to increase New Jersey’s sales tax to 7 percent from 6.625 percent; that did not happen.  However, the state will now collect sales taxes on online out-of-state purchases, thanks to the Supreme Court’s decision in South Dakota v. Wayfair.  Thus, although the rate won’t increase, the tax will apply to more items.  The math is not complicated; someone who spends $1,000 a year online will pay $66.25 more in taxes.

Another major component of state revenue, the income tax, has also been increased, but not by as much as the governor wanted.  Governor Murphy wanted a higher rate on individuals earning more than $1 million; the budget agreement includes the 10.75 percent rate he sought, but on income more than $5 million. 

President Sweeney got some of what he wanted, too.  The budget also raises the corporate rate from 9 percent to 11.5 percent.  Here, there is a $1 million income threshold. 

The trifecta of tax increases on sales, individual income, and corporate income is bad enough for a state already losing residents and businesses to states with better economic environments, but the Murphy-Sweeney compromise also puts new taxes on popular innovative products: there will be a 5 percent fee on Airbnb, a 50-cent tax on each solo Uber ride and a 25-cent tax on each shared ride, and a 10-cent per milliliter tax on liquid nicotine, making it more expensive to quit smoking. 

Shopping bags, both plastic and paper, perennial targets of the left, are also on the conveyor belt of new taxes: the legislature imposed a 5-cent tax, but Governor Murphy, who has line-item veto power, is still reviewing it.

The governor defended his tax increases as urgently necessary for “investment” and “obligations,” saying they will make the state “stronger and fairer.”  He nakedly embraces a philosophy of bigger government and higher taxes, which will only hurt his state’s long-term economy as its government refuses to prioritize services and enact spending cuts.

It is one thing to shrug and say the tax increases might have been worse.  But for ordinary residents of New Jersey, there is not much to like.