New Jersey tax collections in May dipped 5.5% compared with last May, though year-to-date returns are up about 10% over last year, Treasury officials said Friday.
The latest figures come as the Democrat-led Legislature is expected to unveil its budget proposal next week. Murphy has already unveiled his $38.6 billion budget.
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The constitution requires a balanced budget by July 1.
The figures show New Jersey's major tax sources — income, business and sales — in May were $2.5 billion, down $142 million over last May. Treasury officials say overall collections for the year match projections and total $29.4 billion, or 10% above the same period last year.
Though state government is controlled entirely by Democrats, lawmakers are clashing with Gov. Phil Murphy.
Murphy wants to raise income taxes on people earning over $1 million from a top marginal rate of 8.97% to 10.75%, but lawmakers say they won't do it. The disagreement led in part on Thursday to a demonstration with an estimated 3,000 labor union members chanting in favor of higher taxes for the wealthy.
The Assembly faces voters in November. The state Senate is not on the ballot this year.
This same dispute was the source of a near government shutdown last year, but Murphy and Democrats agreed on a budget that raised taxes on people making over $5 million a year and imposed a four-year business tax increase that will eventually expire.
Murphy campaigned on raising what he calls a millionaire's tax, and Democrats voted for it five times under the previous governor, who vetoed it.
Senate President Steve Sweeney has said he wants to get the state's fiscal house in order by overhauling public worker pensions and cutting retiree benefits.
The governor has called for giving residents a $125 refundable tax credit on their income taxes intended to offset high property tax bills if lawmakers go along with the tax hike, but Sweeney rejected the proposal.
Aside from the millionaire's tax, lawmakers reacted openly to Murphy's $38.6 billion budget proposal, which contains about $1.1 billion in savings, mostly from lower public worker health benefit costs that have been agreed to by labor unions.
On the spending side, Murphy is seeking increasing general fund support for New Jersey Transit from roughly $307 million to $407 million. He has said there would be no fare increase under his budget if approved.
Education aid would go up by $206 million, or roughly 3% under his plan.
The state's public pension payment would go up to $3.8 billion from $3.2 billion under Murphy's budget. The first-term Democrat is also seeking to increase the state's $1 billion surplus by 20%.