Murphy opposes Coughlin's senior tax plan, raising specter of government shutdown

Gov. Phil Murphy said Thursday he's concerned about a new senior tax cut proposal by the Assembly speaker, and aides said his office is preparing for a potential government shutdown a month before the deadline to sign a budget.

The governor's opposition to the plan — unveiled Thursday afternoon by Speaker Craig Coughlin — may foreshadow an intense intraparty dispute after several years of relatively placid negotiations thanks to strong tax returns supporting the budget. But with revenues already being forecast to decline steeply over the next two fiscal years, Murphy views Coughlin's "Stay NJ" plan as financially irresponsible, three senior administration officials told POLITICO.

Murphy reinforced that view in a brief meeting with reporters after an event Thursday, saying two elements are "concerning" to him: the cost of the program and a lack of eligibility limits.

"We've got revenues that are softening already, which we expected," Murphy said. The program would cost $1.7 billion, he added, and "that's an annual freight that would blow up all the great progress we've made with the rating agencies."

Coughlin responded diplomatically to Murphy's comments when he met with reporters Thursday afternoon.

"We have a history of having worked together to do an awful lot of good things for the state of New Jersey," he said. "We have had issues where we've had to work through them over that course of that time. And I think we've demonstrated pretty clearly that we always act in the best interest of New Jersey and come together to do what's right for the people in New Jersey. I suspect that's going to happen again."

Coughlin's bill, A-1, would provide homeowners older than 65 — regardless of income — tax credits worth up to 50 percent of their annual bill, with a $10,000 limit. It would cost the state $300 million in the next fiscal year and ramp up over time to $1.2 billion annually after fiscal year 2028.

NJ Advance Media first reported Thursday that Murphy would shut down state government over the proposal. When a reporter asked Murphy about it, he said, after explaining his concerns, "We're serious."

State government hasn't shut down since a budget fight between former Republican Gov. Chris Christie and Assembly Speaker Vincent Prieto in 2017, a dramatic standoff that led to the infamous photos of Christie sitting on the beach outside the governor's residence on Long Beach Island (as well as the inaccurate characterization he shut down beaches).

In Murphy's first year in office, 2018, a dispute with then-Senate President Steve Sweeney over a millionaire's tax nearly led to a shutdown, but the two sides agreed on a compromise spending plan that included a surcharge on corporate business taxes. That surcharge is now set to expire at the end of the year and may become another sticking point in budget negotiations this year.

Murphy has repeatedly said he intends to keep his promise of letting the 2.5 percent surcharge expire, but current Senate President Nick Scutari last week said he's open to keeping it. That surcharge could cost the state up to $1 billion in lost revenue in the 2025 fiscal year, according to the Treasury Department.

The budget is due June 30. A shutdown would mean the closure of state parks, offices and other services.