Feud Over Millionaire’s Tax Inches New Jersey Closer to Shutdown

TRENTON, N.J. — What began as a central campaign promise from Gov. Philip D. Murphy to raise taxes on New Jersey’s wealthiest people has become the wedge issue that has fractured Democratic control in state, threatening a government shutdown for the second time in two years.

Trenton has been consumed by every twist and turn of the last-minute budget negotiations, which have included counterproposals to raise taxes on short-term rentals and businesses, but Murphy’s stance on a so-called millionaire’s tax remains the central sticking point. The governor believes it is the best source of sustainable revenue, while Stephen M. Sweeney, the Senate president, has argued it will drive the wealthy from the state.

The budget deadline is midnight Saturday; Murphy and legislative leaders remained huddled in a closed-door meeting late Thursday evening, but gave no sign of being closer to an agreement. The Senate is not scheduled to convene for a vote until Saturday.

The brinkmanship is not unusual and is often baked into government budget negotiations with threats of a shutdown serving as catalysts to last-minute deals. But the budget battle in New Jersey has become the main knot in what has evolved into a personal and political tug-of-war between Murphy and state legislative leaders.

Murphy, a relative political neophyte who has never held elected office, has sought to establish himself as a disruptive force amid the entrenched politics of Trenton, and Sweeney, who once sought the office Murphy holds, has increasingly tried to resist the power the governor has tried to wield over the legislature.

“Time is running out,” Murphy said Thursday, though it seemed at least for the moment that the personal acrimony had eased.

Gone were Sweeney’s attacks on Murphy as a “Goldman Sachs executive” and Murphy’s broad criticism of “Christie enablers” in the Legislature. Instead, Murphy began his public schedule Thursday with staid remarks during a Cabinet meeting, where the assembled officials were discussing the parameters of a potential shutdown.

“We’re going through that painful process of contingency plans, how the next few days are going to work out,” Murphy said, adding, “I would be abrogating my responsibilities if we did not plan for the whole range of possible outcomes, if logic doesn’t prevail, including the shutdown of the state. All the issues that get tied into that: casinos and parks and everything else.”

During a news conference at a local high school, Murphy indicated that it would be difficult for him to accept any budget that did not include some form of a tax on the wealthy.

“It’s hard for me to get my mind around it, given how obvious it is,” he said, referring to the millionaire’s tax. He added: “I’m happy to look at the edges of the level and rates. I think everyone knows that.”

He also echoed comments he had made Wednesday, rejecting the latest counterproposal from Sweeney to tax short-term rentals, which would largely apply to summer houses along the Jersey Shore.

“I’m not, for example, open to giving millionaires, on one hand, a free pass so we can tax a family’s long awaited weeks vacation at the Jersey Shore,” he said. “I’m willing to compromise and that’s an important point. I want people to think of me as reasonable and resolved.”

As the deadline approached, both camps were engaged not only in selling their respective positions, but in making clear who would be to blame if a deal is not reached in time.

Murphy spent Tuesday making his pitch in between the screaming horns of incoming trains at the East Rutherford train station, saying that a fare increase could be in store for New Jersey Transit riders if his budget is not adopted.

He also threatened to use his line-item veto power to slash more than $850 million in the budget passed by the Legislature, arguing that it did not provide enough revenue to cover projected spending.

On the same day, Sweeney visited Abilities Solutions, an organization in the southern part of the state that provides jobs for people with developmental disabilities and that would have its funding cut under Murphy’s line-item veto.

“What Democrat cuts funding to a program like this?” said Sweeney, whose daughter has Down syndrome.

Wednesday, both men were pointing fingers at each other.

Murphy’s message was that the Legislature was afraid to tax the affluent. “The other side is going to stand either on behalf of cutting $800 million of desperately needed investments, or standing to allow the state to shut down because they’re protecting millionaires,” Murphy said at an event in Newark. “I’ll take my side of that any day of the week.”

Sweeney put the blame on a governor too eager to tax: “If they shut it down, it’s because the governor has decided to shut it down because he wants to raise taxes on people and we don’t want to do that.”

The debate over the budget has largely involved Democrats, who control the governor’s office and both chambers of the Legislature. But the state’s Republican minority has been trying to amplify the discord.

“Only among New Jersey Democrats would a debate over two tax increases morph into a discussion over three,” Tom Kean Jr., the Senate Republican leader, said on Twitter.

With the possibility that state parks and beaches may close just as a heat wave is predicted, the chance of a resolution largely rests with Murphy and Sweeney. There is one arena, at least, in which Murphy has already conceded. After a reporter asked the governor about being in an “arm wrestling match” with Sweeney, a former union leader, he pointed to his biceps.

“Who do you think’s going to win that?” Murphy said. “Don’t put me up against an iron worker.”