Most States Are Reducing Tax Rates; Gov. Murphy Raised Tax Rates to Increase Government Spending

Thanks to Gov. Murphy and his accommodation of tax-thirsty government unions — who also happen to be his biggest political supporters — New Jersey continues to be a negative outlier when it comes to taxes.

Last week Sunlight reported on New Jersey’s exceptionally high corporate tax rate and how a faux-coalition of government unions and their allies was pushing Murphy to keep New Jersey’s tax climate dead last in the nation.  This week it’s a new Tax Foundation study on individual income tax rates, where Murphy’s tax hikes have made New Jersey the third-highest-taxed state in the nation, ahead of only New York and California.

Recall that as soon as Murphy entered office in 2018, he acceded to the wishes of the very same group of government unions and their allies as mentioned above and increased the highest income tax bracket to 10.75% for those earning $5 million or more.  Then in another election year in 2021, and again acceding to the wishes of these same government unions, Murphy extended the 10.75% bracket to all those earning $1 million.  But as the Tax Foundation study shows, Murphy is raising tax rates while most other states are cutting them.

All told, 43 states reduced their tax burdens in 2021-22, and 21 of them cut income taxes.  As the chart below shows (larger version of the chart here), the national median top income tax rate declined from 5.40% in 2020 to 5% in 2022.  By contrast, Murphy raised New Jersey’s top rate from 8.93% to 10.75%. 

The reality is that most states saw the 2020-22 windfalls from federal pandemic aid and record tax revenues as an opportunity to cut taxes.  Not Murphy: he raised taxes so he could increase government spending by 10% — just as his government union supporters wanted.  With an eye on a White House run, Murphy’s recent temporary property tax rebates are an attempt to obscure this reality rather than any real reform of New Jersey’s sky-high tax rates.

As always, New Jersey under Murphy: run by and for the special interests.