Latest tax plan: Sales taxes on short-term Jersey Shore rentals
TRENTON — Democratic legislative leaders want to raise taxes on short-term vacation rentals, like those common along the Jersey Shore, and sales of million-dollar homes in their latest counter to Gov. Phil Murphy’s budget plan.
Facing a Saturday deadline to get the 2019 budget in place before the fiscal year begins, lawmakers opted against accepting Murphy’s framework for a compromise on the two sides’ income, sales and corporate tax proposals.
Murphy canceled a scheduled Wednesday afternoon meeting with legislative leaders in order to take time to review the latest offer. The Senate and Assembly then canceled their voting sessions scheduled for Thursday and are now both due back at the Statehouse on Friday.
In addition to the $250 million tax on short-term rentals and $110 million in higher taxes on sales of homes worth at least $1 million, the Legislature’s plan counts on $49 million from a not-yet-approved tax on legal marijuana sales.
Senate President Steve Sweeney, D-Gloucester, called the tax plans “surgical in nature.” He said he isn’t concerned that applying the sales tax to vacation rentals would hurt Shore tourism. He said every other Atlantic coast state taxes such rentals, from Florida to Maine.
“The only state that doesn’t is us. We are it. We’re the outlier,” Sweeney said. “We’re taxing Airbnbs now. It’s time for the Shore rentals to get in the game.
“There’s actually an unfair situation if you’re a hotel owner,” he said. “A hotel owner has to pay taxes on every room they rent. And they have to compete against other people that are making profits without paying the taxes. So it’s just about fairness. We’re the last state to do it.”
State Sen. Vin Gopal, D-Monmouth, said on Twitter that the tax would alienate vacationers and that the budget can be balanced “without this dangerous tax.”
“Putting New Jersey’s vital tourism industry on the line is unacceptable,” Gopal said.
The Legislature’s latest plan revamps the business tax surcharge on corporate profits by applying it for four years, rather than two. Murphy wanted the tax to recur for more years. The governor also said the rates shouldn’t be as high, but the Legislature’s plan didn’t incorporate that request.
“My preferred plan, honestly, is something that has a longer life that ultimately sunsets maybe to a level ultimately below the level it is at today,” Murphy said.
New Jersey’s corporate tax is currently 9 percent. Under the Legislature’s plan, it would temporarily increase to 13 percent for corporations with at least $25 million in New Jersey-based profits and 11.5 percent for those with profits between $1 million and $25 million.
“If we can get the economy going, that would be an ideal result,” Murphy said. “A longer dated, reasonable increase, and then if we get the momentum that we think we can get, to say with conviction to the business community, we might be able to get this sucker down below even where it is today.”
Sweeney reiterated his opposition to Murphy’s tax proposals and suggested he wasn’t that enthused about his own, either.
“I don’t like all these things,” Sweeney said. “But in a willingness to look further and compromise with the governor – because we all want to compromise. No one wants to fight. We brought these things forward for one reason: compromise.”
“I don’t think there’s going to be a shutdown, to be perfectly honest with you,” Sweeney said. “What we’ve been talking about now – if they shut it down, it’s because the governor’s decided to shut it down because he wants to raise taxes on people. And we don’t want to do that.”
In all, the Legislature's list of proposals comes to $889 million, which would be enough to cover the $855 million Murphy's administration flagged in the budget the Senate and Assembly approved last week.
Murphy didn’t comment publicly after receiving the Legislature’s latest plan.
Earlier in the day in Newark, Murphy said he is “trying to find a reasonable common ground while retaining our absolute resolve in the commitment of the things we want to get done.”
“No one wants a shutdown. No one wants a vetoed budget that eliminates so many of these key investments that we know we need to ensure our future,” Murphy said. “And I am hopeful that the Legislature will see this opportunity and that we’ll be able to move forward in a timely manner.”
“I never said it would be easy. I never said there wouldn’t be sacrifices,” he said. “But each of us knows that choosing the hard right over the easy wrong is the only way to achieve a better future, and it’s the only way I will govern.”
Murphy said the “obvious solution” is to raise taxes on income over $1 million but that he is “absolutely” open to reasonable alternatives.
“We remain open-minded. But they’ve got to be real, and they’ve got to be fair,” Murphy said.
“If people come with goodwill on all sides, and I have no reason to believe there isn’t, but I think we could resolve this in 30 minutes,” he said.
Among those joining Murphy for his morning news conference were Newark Mayor Ras Baraka and three state lawmakers who represent parts of the city, including Assemblyman Ralph Caputo, D-Essex,
“A good deal beats a bad war,” Caputo said.