Working on the Jersey Shore last summer was more fulfilling than ever. Not only could I bask in the sun with my peers and neighbours, but the shore’s successful recovery from Sandy created a feeling of exuberance alongside its economic progress. With the unemployment rate on track to fall below 4% for the first time since 2000, and a governor with approval ratings lower than his shoe size booted out of office, it’s hard to imagine how Phil Murphy could mess things up when he becomes governor next month.
On that note, it’s hard to imagine much of anything about Phil Murphy. Although he won the gubernatorial election with a strong majority of the vote, much of the electorate still have next to no idea who he is, or what his major policy positions are. In fact, my own mother didn’t know that he worked at Goldman Sachs, was a major Democratic Party fundraiser, or served as ambassador to Germany until I told her about this piece. But it’s not her fault. Murphy made loud and clear his plans to improve issues like property taxes, public schools, and transportation.This hit home for families like mine—with a recently purchased home, three kids in the public school system, and a daily commuter. But Murphy’s made as few mentions as possible to his impressive background.
This is no accident. In his pursuit of the governorship, Murphy was keenly aware of the recent backlash against establishment politicians with ties to the financial industry and foreign policy wonks. This is especially true among my generation, because we grew up in the tumultuous aftermath of the 2008 financial crisis, and only recently became politically active. Anti-establishment politicians like Bernie Sander and Donald Trump were much more popular among my generation, both of whom were fiery populists who supported huge renewals in infrastructure and social security, but decried trade deals and big money influence, (here’s links to compilations of Sanders and Trump saying “yuuge”). Phil Murphy, on the other hand, aligns much more closely with the now very unpopular Hillary Clinton. They’re both reserved establishment liberals with foreign policy experience and ties to Goldman Sachs. Murphy walked a very fine line to the governorship: he had to take a firm stance against Trump, but simultaneously oppose many of the same things that Trump is against, and all without losing the support of the central electorate.
However, as much as Murphy relied on embracing Trump’s populism and deriding Trump’s contempt for ethics to win the governorship, Murphy will struggle to meet many of his campaign promises in the face of the new GOP tax plan. Much like comfortably re-elected New York mayor Bill de Blasio, Murphy plans to pay for his transportation and education expansions with a millionaire’s tax. However, unless major changes occur while the House and Senate attempt to reconcile their versions of the bill, Trump’s tax plan will remove any deductions for state income tax. In the haphazard balancing of each GOP senator’s special interests, the senate has created pork-barrel legislation where everyday residents of high tax states like California, New York, and New Jersey will become the big losers.
If Murphy doesn’t take changes to the U.S. tax code into account, and proceeds to significantly raise the taxes of New Jersey’s highest earners, there would be significant incentive for the people whom Murphy’s relying on for his progressive reforms to leave the state. In fact, since the wealthiest 1% of New Jerseyans provide 40% of the state government’s income, if even a fraction of them left, the state would receive a considerable dent in its funding. This would be disastrous not only for Murphy’s political agenda, but for all of us Jersey residents: crucial government programs like pensions and schools would suffer immediately, and our impressive recovery since Sandy and the financial crisis would come to a grinding halt.
As a Columbia College freshman, many of my classmates are excited by Murphy’s election, but on behalf of my home-state, I urge him to tread carefully. And this careful treading will hopefully involve exploiting an interesting loophole in the tax plan that might just solve New Jersey’s new tax problem.
According to UChicago professor Dan Hemel: although the GOP tax plan removes deductions that individuals can make for their state income taxes, it doesn’t affect employer’s abilities to deduct payroll taxes from their federal tax burden. If Murphy can coordinate with the legislative and business leaders, our state could shift personal income taxes to businesses. Thus, we would avoid hemorrhaging our funds towards the new federal tax provisions—like giving back money to owners of private jets. By using a payroll tax system, your employer essentially pays what would amount to your income tax for you, but then pays you that amount less. This shift in tax burden allows a net deduction of what was originally your income tax.
We’re all happy to be rid of Christie, but Murphy must work carefully to guarantee our goodwill, especially in the Trump era.