Outgoing Gov. Phil Murphy has once again acted like a sailor on leave, proposing the largest budget in state history – more than $58 billion. Murphy has made no attempt to resolve the structural deficit that plagues New Jersey’s annual budget. Instead, he seeks to balance it with a mix of tax increases on title transfers, cannabis cultivation and online gambling, among others. He also dips heavily into the state’s surplus, leaving New Jersey with reserves too low to handle a significant emergency.
He justifies this spending in the name of climate change, social justice initiatives and correcting the sins of his predecessors. These include underfunded pension systems, high employee health insurance costs, a public transit system on life support and an incentive for residents who can leave the state to do so.
Through it all, we remain overtaxed. New Jersey has the worst property tax burden in the nation, one of the highest corporate income tax rates and an individual income tax system ranked 48th out of 50 by the Tax Foundation. Sales and excise taxes, an inheritance tax and myriad hidden fees – such as those in electricity bills – add to the burden.
Yet, despite all this taxation, the state still spends more than it takes in. According to the Tax Foundation, New Jersey’s tax system ranks 49th out of 50 in the 2025 State Tax Competitive Index. The state levies all major taxes at high rates and layers on significant complexity.
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Despite promises of tax relief, history shows that new taxes and spending increases outpace any reductions.
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One example of the unchecked expansion of New Jersey’s tax system is the state income tax.
In July 1976, after three years of chaos in Trenton over public school funding – then reliant on property taxes – the state Supreme Court ordered all public schools closed until a sustainable funding mechanism was found. In response, the Legislature enacted a state income tax. A constitutional amendment dictated that its revenues would be used exclusively for property tax relief, primarily by increasing the state’s share of school funding.
Fast forward to today: New Jersey taxpayers now face an income tax with eight brackets and a top marginal rate of 10.75%. Meanwhile, the state still has the highest per capita property tax collections in the country.
We could go on about the state’s rankings among the worst in the nation for property, individual income, sales, corporate and unemployment insurance taxes, as well as a variety of excise taxes.
Now, despite every tax imaginable, the Sweeney Center at Rowan University warns of a “looming fiscal cliff.” In a February report, the center’s fourth multiyear independent forecast revealed a growing gap between projected revenues and expenses.
New Jersey has balanced its budget in recent years by relying on a surplus bolstered by federal Covid-19 aid. But that surplus is dwindling. According to the Sweeney Center, only seven states have a lower reserve balance as a percentage of revenue.
The Sweeney Center’s findings, though independent, may be seen as center-left. The Tax Foundation, which prides itself on bipartisan credibility, may be viewed as center-right. Yet both agree: New Jersey faces serious financial trouble despite its high and complex tax system.
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True financial reform will require bold leadership, tough decisions, and a willingness to challenge entrenched spending habits.
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The state is fast approaching primary elections that will determine the next gubernatorial candidates, as Murphy is term-limited. All 80 seats in the state Assembly are also on the ballot. As a result, we will hear a lot about tax relief.
Yet experts predict programs like the newly introduced Stay NJ will be short-lived, given revenue projections beyond the fiscal year 2026 budget. The only way to achieve true tax relief is by cutting spending.
This is difficult because three major spending areas – education aid, pension payments and health benefits – are challenging to reduce. However, real tax relief requires fundamental changes to public employee benefits and the structure of the K-12 education system. Addressing NJ Transit’s financial woes must also be part of the conversation.
Two Harvard Kennedy School faculty members recently proposed several steps for New Jersey to regain fiscal stability, including a comprehensive review of the state budget. It’s time to take that advice seriously – and to do so in a bipartisan manner.
Murphy’s proposed 2025 budget is at a historic high of $58 billion, up from $34.7 billion in fiscal year 2018 – the result of a budget compromise following a three-day government shutdown. That’s a 67% increase in spending over that period.
No doubt, many have benefited from this spending. But that alone cannot justify it. We must confront the reality that meaningful tax relief requires hard decisions about what the state can and cannot afford.
Quotes From the Bible
“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” — Luke 14:28 (The importance of fiscal responsibility and planning.)
