Cato has released their 2024 Fiscal Policy Report on America's Governors. Our Governor, Phil Murphy, has been given a grade of D or 42 points. This is an improvement from the 2022 Report (F/29) and the 2020 Report (F/32).
Below is their report on New Jersey taken from the report (Creative Commons license). Read the full report here.
Phil Murphy, Democrat
Legislature: Democratic
Grade: D
Phil Murphy worked at Goldman Sachs for two decades. He also served as finance chair of the Democratic National Committee and as US ambassador to Germany. Unlike his predecessor in the governor’s office, Chris Christie, who rejected tax hikes, Murphy supports them and receives a low score on this report.
Murphy’s budget in 2018 proposed increasing the sales tax rate to raise more than $500 million a year, but the legislature rejected the plan. However, Murphy approved a surtax on corporations with incomes above $1 million. The 2.5 percentage point surtax was supposed to last until 2021 but Murphy extended it through 2023. The surtax drained more than $400 million a year from businesses.
Murphy has approved many special-interest tax breaks, such as film production tax credits, temporary rebates, sales tax holidays, and low-income breaks. But these sorts of tax cuts do not support long-term economic growth.
Murphy has aggressively raised income taxes. In 2018, he approved a “millionaire’s tax” that raises about $280 million a year. The law raised the tax rate on incomes above $5 million from 8.97 percent to 10.75 percent. Then, in 2020, Murphy expanded the higher rate to include households earning more than $1 million in order to raise another $450 million a year.
In his 2022 state of the state address, Murphy said that he is for “true tax fairness and asking the wealthiest New Jerseyans—those with incomes in excess of $1 million—to pay a little more in income taxes.”146 But the small group of taxpayers with incomes over $1 million already pay about 29 percent of all New Jersey income taxes.147 IRS data show that New Jersey suffers from net out-migration of taxpayers earning more than $200,000 per year, and Murphy’s policies are exacerbating the problem.148
In 2024, Murphy approved a new corporate surtax to fund public transit, which will cost more than $800 million a year. The surtax is 2.5 percentage points for businesses with more than $10 million in net income, which raises the top corporate tax rate from 9 percent to 11.5 percent.149 Even before the hike, New Jersey ranked last among the 50 states on the Tax Foundation’s business tax climate index.150
Meanwhile, New Jersey hands out billions of dollars in corporate subsidies. Murphy originally denounced subsidies, but he reversed course. The New York Times reported in 2020, “No issue has defined Gov. Philip D. Murphy’s first term in office more than corporate tax incentives. He railed against them as a Democratic candidate for governor,” and yet he later “approved a new tax incentives bill, and the sheer size of it—as well as the breakneck speed at which it was introduced and passed—was shocking, even in New Jersey.”151
In 2024, Murphy jacked up the petroleum products gross receipts tax, which is a $2 billion a year tax on fuel sellers that gets passed along to motorists as higher gas prices. The tax hike will average $224 million a year for the next five years.152 Murphy also approved a new $250 annual fee on electric vehicles.
Despite all the tax hikes, New Jersey struggles to balance its budget, and its rainy day fund is less than 1 percent of expenditures compared to the 50-state average of 12 percent.153 New Jersey also has the highest state liabilities of any state when considering debt and unfunded retirement obligations.
While government spending has slowed in recent years, it has risen substantially during Murphy’s tenure. The general fund budget rose from $35.7 billion in 2018 to $54.8 billion in 2024, which represents an annual average growth rate of 7.4 percent.