Rather than reforming its fiscal policy to incentivize job creation and stem the tide of wealth leaving the state NJ seems intent on covering bullet holes with Band-Aids.  Governor Murphy’s latest move to raise taxes will likely prove counterproductive.

Contained in the recent budget deal is an increase in the state’s personal income tax from 8.97% to 10.75% for those earning $5 million or more.  Governor Murphy originally proposed an application of the higher rate to those earning $1 million or more but could not generate sufficient support.  NJ Senate President Steve Sweeney insisted such a threshold would prompt the wealthy to leave NJ given the positive correlation between higher incomes and mobility.

Business won’t be able to escape the taxman’s reach.  The budget deal includes a 4 year increase in the corporate business tax.  Businesses with net income of at least $1 million will pay 2.5% extra in 2018 and 2019 and 1.5% more in 2020 and 2021.

Other tax increases include a $0.50 per trip surcharge on ride-sharing companies (e.g. Lyft, Uber) and a sales tax on rentals through Airbnb, VRBO and the like.

Governor Murphy also sought to increase the sales tax but was unable to generate sufficient support.

And in a cruel irony NJ increases the maximum property tax deduction from $10,000 to $15,000.  The nominal savings will be more than offset by the additional Fed cost borne by NJ taxpayers given the $10,000 cap on the SALT deduction.