From the Star Ledger:
N.J. income taxes rolling in like never before. Now Dems will fight over what to do with all that extra cash.
New Jersey’s income tax collections came roaring back in April, surprising state leaders and cracking open a debate over how the state should spend its extra cash.
The mid-year recovery led Gov. Phil Murphy’s administration to announce Tuesday it is boosting its revenue forecast for the state budget year that ends June 30 by $377 million and plans to deposit all but $60 million of that money into a depleted “rainy day” fund to cushion the blow of a future downturn.
But the state Legislature may have other plans.
Democratic state Senate Budget Chairman Paul Sarlo, D-Bergen, and Sen. Declan O’Scanlon, R-Monmouth, signaled interest Tuesday in rerouting the $317 million destined for the rainy day fund to next year’s state budget, where it can replace some of the revenue Murphy’s administration wants to collect from a tax increase on millionaires.
The surprise cash alters — but doesn’t resolve — the clash between the governor, who wants to put it in savings, and legislative leaders, who are looking for alternatives to Murphy’s push for a millionaires tax.
Sarlo said Tuesday the two-year revenue updates from the state Department of Treasury bolster legislative leaders’ position.
“The pressure to do a millionaires tax is gone,” Sarlo said after a Senate budget committee hearing. “The pressure of balancing the budget, that pressure is off. We don’t need that any longer to balance the budget.”
The state collected $3.6 billion in income taxes in April, confirming the Treasury Department’s suspicions the slowdown in the tax’s revenue was caused by high earners responding to the new $10,000 cap on state and local tax deductions by delaying their estimated tax payments until closer to the April filing deadline.
“While we correctly anticipated the taxpayer behavior that played out, we not only met our robust April tax collection targets, but we encountered somewhat of a surprise when Gross Income Tax collections set a new April record,” Muoio said.
“With the current surge in the (Gross Income Tax) outlook, the governor is proposing to take advantage of this good fortune by returning $250 million of this revenue directly back to the taxpayers in the form of property tax relief in FY20,” Muoio said.
“But without the half a billion dollars generated by the true millionaires tax, the (Gross Income Tax) revenue boost will be eliminated, and funding for increased property tax relief and other priorities will be nearly impossible.”