Budget Proposal Announced By New Jersey Governor Phil Murphy

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Estate Planning & Tax Controversy
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On March 13, 2018, Governor Murphy presented his budget address for Fiscal Year 2019.  It has been said no one would eat a sausage if you watched it being made.  The same can be said of the legislative process.

Between this address and July 1st when the budget for Fiscal Year 2019 is to be in place, there may a number of changes to what was presented.

First, a quick comment upon what was not said.  Even though Candidate Murphy had stated that he would not modify New Jersey’s decision to rescind its Estate Tax, some had speculated it might reappear in some form.  While no one expected to see the exemption revert to the $675,000 level effective for persons who died before December 31, 2016, some adjustments were anticipated.  That still may occur, but was not a point raised in the Governor’s address.

The Governor has proposed a budget of $37.4B.  He has proposed an increase in school related funding.  A goal is to expand pre-K funding statewide.  As a first step in plans to make community college tuition free for all students, over the next year Governor Murphy proposed an additional investment of $50M in community colleges.

The Governor has proposed raising the state property tax deduction from its current level of $10K to $15K.  He has proposed creation of a new Child and Dependent Care Tax Credit for middle class and working families.

The budget also contains other proposals for new programs or expansion of existing programs.

The Governor has proposed reinstating the sales tax rate in New Jersey at 7%.  On the revenue side, the Governor has proposed a “millionaire’s tax” upon those who have taxable income in excess of $1M.  He contemplates such a tax would raise approximately $765M.  He also proposed closing a “loophole” which benefits hedge fund managers.  He believes that doing so will generate an additional $1M.

The Governor also favors legalization of marijuana.  It is not clear that the Legislature will support this concept or, if legislation is enacted the amount of the revenue which might be realized.

In concluding, the Governor declared as his goal the desire to build a stronger and fairer New Jersey.

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