CNBC Transcript: New Jersey's Governor-Elect Phil Murphy Talks Tax Reform With CNBC's Squawk On The Street

CARL QUINTANILLA: NEW JERSEY'S GOVERNOR-ELECT PHIL MURPHY IS PREPARING TO STEP INTO HIS NEW ROLE IN JUST A FEW WEEKS. HIS HIGH-TAX STATE IS IN THE SPOTLIGHT OF COURSE, THANKS TO THE NEW TAX PLAN. THE GOVERNOR-ELECT JOINS US FROM OUR HEADQUARTERS IN NEW JERSEY. GOVERNOR-ELECT, IT'S GREAT TO HAVE YOU. GOOD MORNING.

PHIL MURPHY: GOOD MORNING, GREAT TO BE HERE.

QUINTANILLA: OBVIOUSLY, IT'S A -- IT WILL BE A HISTORIC DAY, CERTAINLY, WHEN THE PRESIDENT SIGNS THIS. THE FIRST QUESTION, OBVIOUSLY, SORT OF LEADS TO "SALT." DO WE HAVE A NUMBER ON WHAT THE AVERAGE NEW JERSEY TAXPAYER, HOW THEY'LL BE IMPACTED BY THE CHANGE IN THAT DEDUCTION?

MURPHY: IT'S MANY THOUSANDS OF DOLLARS, CARL, AND THIS IS AN AWFUL BILL FOR AMERICA, IT'S AN AWFUL DAY FOR AMERICA, AND IT CERTAINLY IS AN AWFUL BILL FOR NEW JERSEY. WE'RE GOING TO HAVE TO FIGHT BACK. THIS IS - IT GOES RIGHT AT THE HEART OF THE MIDDLE CLASS AND THOSE WHO DREAM TO GET INTO THE MIDDLE CLASS, IT BREAKS THOSE DREAMS. IT'S JUST AN AWFUL, AWFUL BILL.

QUINTANILLA: YOU SAY MANY THOUSANDS. CAN YOU BE ANY MORE SPECIFIC THAN THAT?

MURPHY: WELL, YOU'VE GOT AT LEAST A QUARTER, I THINK, OF HOMEOWNERS IN NEW JERSEY WHO PAY MORE THAN $10,000 A YEAR IN PROPERTY TAXES. YOU'VE GOT FOUR COUNTIES OF THE 21 WHERE THE AVERAGE PROPERTY TAX BILL IS OVER $10,000. IT'S A HUGE DEVASTATING IMPACT AND NOT JUST NEW JERSEY, AS YOU KNOW, IT'S OTHER STATES LIKE US. NEW YORK AND CALIFORNIA, TO NAME TWO.

DAVID FABER: YEAH, AND YOU HAVE OBVIOUSLY GOT HIGHS, AS YOU POINT OUT, STATE INCOME TAXE. I THINK AT THE HIGHEST RATE, AT 8.97%, OVER $500,000, GOVERNOR. WE'RE LOOKING AT SOME OF IT THERE. WHAT ARE YOUR EXPECTATIONS FOR THE ECONOMY OF YOUR STATE, THEN? AND IT WOULD SEEM THAT YOU'RE NOT IN A POSITION TO RAISE TAXES ANY FURTHER IF IN FACT YOU SHOULD SEE FLIGHT OF SOME HIGH EARNERS TO LOWER TAX STATES.

MURPHY: WELL, LISTEN, WE CAMPAINED ON A THEME OF A STRONGER AND FAIRER ECONOMY THAT WORKS FOR EVERYONE. RIGHT NOW, NEW JERSEY'S NOT STRONG, IT'S NOT FAIR, AND WHEN IT WORKS, IT DOES NOT WORK FOR ENOUGH OF US. WE WILL STILL PURSUE THAT MISSION, AND WE WILL SUCCEED. THIS MAKES IT HARDER WITHOUT QUESTION. WE HAVE TO GET BACK TO INVESTING IN THE MIDDLE CLASS, THE MIDDLE CLASS, AS I MENTIONED, THOSE WHO DREAM TO GET INTO THE MIDDLE CLASS, HAVE PAID A HUGE PRICE OVER THE PAST EIGHT YEARS IN OUR STATE - NEVER MIND THIS TAX BILL. IT MAKES OUR JOB HARDER, BUT NOT IMPOSSIBLE. WE BELIEVE THAT WE CAN REBOOT A COUPLE OF THE ECONOMIES THAT WE USED TO DOMINATE. THE INNOVATION ECONOMY. YOU CAN ARGUE THAT WE WERE SILICON VALLEY BEFORE THERE WAS A SILICON VALLEY. WE HAVE ALL THOSE PIECES STILL BEFORE US. WE NEED LEADERSHIP THAT UNDERSTANDS HOW YOU PUT IT TOGETHER. THE INFRASTRUCTURE ECONOMY. OUR LOCATION IS ONE THAT 49 OTHER STATES WOULD DIE TO SWAP IN FOR. WE'VE LET THAT ECONOMY RUST. WE CAN -- WE BELIEVE STRONGLY WE CAN REINIGERATE AND REBOOT THOSE ECONOMIES. THIS MAKES IT HARDER, BUT WE WILL SUCCEED.

FABER: WELL, I'M WONDERING HOW YOU'RE GOING TO SUCCEED IF IN FACT-- I MEAN, WHAT ARE YOUR EXPECTATIONS WHEN IT COMES TO PEOPLE LEAVING THE STATE? HIGH EARNERS, FOR EXAMPLE, WHICH TYPICALLY CONTRIBUTE A HIGHER PERCENTAGE OF THE INCOME TAX OVERALL, I KNOW THAT'S THE CASE FOR NEW YORK CITY, FOR EXAMPLE. WHAT ARE YOUR EXPECTATIONS? DO YOU THINK PEOPLE ARE GOING TO START TO LEAVE, AND IF IN FACT THAT IS THE CASE, ISN'T THAT GOING TO HAVE AN ECONOMIC TOLL? - NOT TO MENTION LESS MONEY IN PEOPLE'S WALLETS AND THEIR WILLINGNESS TO SPEND OVERALL?

MURPHY: YEAH, A COUPLE THINGS. NUMBER ONE, THERE'S A MYTH THAT NEW JERSEY, THAT EVERYBODY IS LEAVING. THAT'S NOT TRUE. NEW JERSEY HAS BEEN GROWING. IN PARTICULAR, IN SOME OF THE DYNAMIC GROWING IMMIGRANT COMMUNITIES. I'D PICK THE SOUTH ASIAN COMMUNITY AS AN EXAMPLE. SO, NEW JERSEY IS IN FACT GROWING. SECONDLY, IT DEPENDS. I MEAN, YOU GUYS HAVE BEEN ANALYZING THIS, I KNOW, ALL MORNING AND FOR THE PAST NUMBER OF WEEKS- IT DEPENDS ON WHO YOU ARE AND WHERE YOU SIT, THE EXTENT TO WHICH YOU ARE GETTING A REALLY SWEET DEAL ON YOUR INCOME TAX, WEIGHING THAT UP AGAINST WHAT MIGHT HAPPEN TO YOUR PROPERTY TAX REALITY. YOU KNOW, NEW JERSEY WAS NEVER THE LOW-COST STATE TO LIVE IN. WE WERE ALWAYS ON OUR BEST DAY THE GOOD VALUE FOR MONEY STATE THERE ARE EXAMPLES OF AROUND OUR COUNTRY RIGHT NOW WHERE THAT -- WHERE THOSE STATES HAVE THAT IMBALANCE, AND THEY ARE HUMMING. MASSACHUSETTS, CALIFORNIA, TO PICK TWO. THAT'S THE OBJECTIVE FOR US. THAT YOU PAY A PREMIUM TO LIVE IN A STATE LIKE OURS, BUT BOY, YOU GET A LOT BACK FOR THAT. AND OUR JOB IS TO MAKE FOLKS FEEL LIKE, YOU KNOW WHAT, THAT PREMIUM WAS WORTH IT. WE GOT GREAT INFRASTRUCTURE, GREAT PUBLIC SCHOOLS, COMMUNITIES THAT MILLENNIALS WANT TO LIVE IN, THOSE ECONOMIES I TALKED ABOUT GOT REBOOTED. THE MOST DIVERSE STATE IN THE NATION. THOSE ARE INCREDIBLE ASSETS THAT WE HAVE TO INVEST IN.

MELISSA LEE: GOVERNOR-ELECT, ARE YOU BASICALLY SAYING THAT YOU DON'T ANTICIPATE ANY IMPACT TO NEW JERSEY'S POPULATION. YES, NEW JERSEY MAY HAVE BEEN IN A PERIOD OF GROWTH, BUT WITH THE NEW TAX PLAN, MOODY'S HAS ESTIMATED IN HIGH TAX STATES, PROPERTY BUYS WILL GO DOWN 10%. YOU'RE SAYING THEY'LL SEE AN INCREASE OF A FEW THOUSAND DOLLARS. THIS WILL HAVE NO IMPACT ON PEOPLE'S DECISION TO GO TO NEW JERSEY ON THAT CONTINUED GROWTH TRAJECTORY AND CORPORATIONS DECISIONS TO EITHER MOVE OR RELOCATE TO NEW JERSEY?

MURPHY: I'M NOT SAYING THAT NO ONE WOULD LEAVE A HIGH-COST STATE. I'M NOT SAYING THAT AT ALL. WHAT I'M SAYING IS - IS THAT NEW JERSEY HAS THE OPPORTUNITY TO PACKAGE AN ECONOMIC ECOSYSTEM THAT WE USED TO DO WELL AND OTHER STATES ARE DOING RIGHT NOW, WHERE IF YOU SAY LISTEN, YOUR TAX RATE MATTERS, OBVIOUSLY, THAT MATTERS TO INDIVIDUALS, IT MATTERS TO COMPANIES. BUT BY THE WAY, TOP THREE PUBLIC SCHOOLS IN THE NATION, TOP THREE EDUCATED WORKFORCE IN THE NATION, THE MOST DIVERSE POPULATION IN THE UNITED STATES, WE SIT BESIDE WHERE YOU ARE RIGHT NOW, THE LARGEST MARKET IN THE WORLD. WE'RE THE DENSEST STATE IN THE NATION - THAT GIVES US ENVIRONMENT CHALLENGES, BUT A HUGE LEG UP ON THE TECHNOLOGY AND INNOVATION ECONOMIES. OUR JOB IS TO GET THAT INTO BALANCE. WE USED TO HAVE IT IN BALANCE, AND THAT'S GOING TO BE OUR MISSION TO DO SO AGAIN. AND ALL THE WHILE, WE HAVE TO SHRINK IN EQUITIES. YOU KNOW, OUR STATE OVER THE PAST EIGHT YEARS HAS BECOME AN "US VERSUS THEM" STATE. VERY FEW HAVE DONE WELL. MOST FOLKS HAVE BEEN ON THE OUTSIDE LOOKING IN. WE HAVE TO MAKE SURE WE GET AS INCLUSIVE AS WE CAN, AND WE WILL.

QUINTANILLA: DOES THE BILL ESSENTIALLY HANDICAP YOUR ADMINISTRATION'S ABILITY TO RAISE PROPERTY TAXES OR STATE INCOME TAX? WOULD YOU EVEN TRY AT THIS POINT?

MURPHY: I THINK YOU HAVE TO HAVE EVERYTHING ON THE TABLE. AND WE'VE SAID THAT BOTH AS IT RELATES TO LOOKING AT EVERYTHING FROM PROPERTY TAXES ALL THE WAY TO THE LEGALITY AND CONSTITUTIONALITY OF THIS BILL. YOU KNOW NEW JERSEY HAS BEEN -- HAS TAKEN A BACK SEAT OVER THE PAST NUMBER OF YEARS IN CHALLENGING WHAT'S COMING AT US OUT OF WASHINGTON. SO, YOU KNOW, WE WILL - YOU SHOULD EXPECT THAT NEW JERSEY WILL LOCK ARMS AND LOOK AT ALL AVAILABLE MEANS, BOTH LEGAL AND OTHERWISE, TO CHALLENGE THIS AND/OR COMPENSATE IT.

QUINTANILLA: TO CHALLENGE THIS BILL IN COURT? THROUGH A STATE A.G.?

MURPHY: IF NEED BE, ABSOLUTELY.

LEE: ON WHAT GROUNDS, GOVERNOR-ELECT?

MURPHY: WELL, YOU SAW THE 500 PAGES OF AMENDMENTS A COUPLE OF FRIDAYS AGO. A LOT OF THEM HANDWRITTEN. I'M NOT A CONSTITUTIONAL LAWYER, BUT THERE - BUT MY GOING-IN BIAS IS THERE ARE GOING TO BE FLAWS, THERE WILL BE HOLES IF THERE ARE, WE WILL EXPLOIT THEM, I HOPE WITH OTHER LIKE-MINDED STATES.

FABER: GOVERNOR-ELECT, IT IS INTERESTING TO NOTE STEVE MNUCHIN, TREASURY SECRETARY, A NEW YORKER AND CALIFORNIAN, GARY COHN, A NEW YORKER FROM THIS AREA, OUR PRESIDENT, OF COURSE, FROM MY HOME TOWN OF QUEENS AND A NEW YORKER ALL HIS LIFE. NOT TO MENTION, DID YOU HAVE ANY REPUBLICANS IN YOUR STATE WHO VOTED IN FAVOR OF THIS AS WELL? I MEAN, I'M JUST SAYING, A LOT OF PEOPLE WHO CONCEIVABLY WOULD HAVE THOUGHT OTHERWISE WERE IN FAVOR OF THIS PARTICULAR DEDUCTION GOING AWAY.

MURPHY: WELL, THE PRESIDENT HAS MADE SOME OUTLANDISH CLAIM THAT HE WOULD PAY A BIG PRICE FOR THIS. HE'S GOING TO BE A BIG WINNER. SO THERE'S A REASON SOMEONE LIKE HIMSELF AND BIG CORPORATIONS ARE GOING TO JUMP IN ON THIS. WE HAVE SEEN THIS MOVIE BEFORE- THE BIG COMPANIES WILL SAY, LISTEN, WE'RE GONNA - THE MONEY WE SAVE WILL GO INTO JOBS AND INCREASED WAGES. WELL WE KNOW THAT'S NOT GOING TO HAPPEN BECAUSE IT'S NEVER HAPPENED BEFORE. THE GAP BETWEEN SENIOR EXECUTIVES AND THE FACTORY FLOORS WILL WIDEN AND SHAREHOLDERS WILL DO JUST GREAT, WHICH IS WHY I ASSUME THE MARKET CONTINUES TO BE UP, BECAUSE THEY'RE GOING TO GET PROFITS TO GO UP AND SHARES WILL BE BOUGHT BACK. WE HAD ONE REPUBLICAN CONGRESSMAN, CONGRESSMAN MACARTHUR, VOTE FOR THE BILL. I DON'T UNDERSTAND THAT. HE AND I HAVE SPOKEN. I DON'T AGREE WITH HIM. I THINK IT'S AN AWFUL POSITION TO HAVE TAKEN. THE OTHER FOUR REPUBLICAN MEMBERS OF THE HOUSE VOTED ON THE RIGHT SIDE OF THIS. OBVIOUSLY, ALL DEMOCRATS IN THE HOUSE IN OUR TWO OUTSTANDING SENATORS VOTED ON THE RIGHT SIDE OF THIS. AGAIN, I DON'T KNOW HOW YOU CAN -- I THINK IT'S NOT A DEMOCRATIC OR REPUBLICAN CALCULATION. IT'S EITHER YOU'RE WITH YOUR CONSTITUENTS WHO ELECTED YOU OR YOU'RE WITH DONALD TRUMP. IT'S THAT SIMPLE. HE SAW IT WITH THE PRESIDENT, EVERYONE ELSE SAW IT WITH THEIR CONSTITUENTS.

QUINTANILLA: FINALLY, I WONDER IF YOU WOULD BE MORE OPTIMISTIC ABOUT AN INFRASTRUCTURE BILL IF THAT BECOMES A RIDING THEME IN 2018?

MURPHY: LISTEN, WE WOULD BE DESPERATE FOR THAT. WE WANT THE GATEWAY TUNNEL BUILT. IT WOULD BE THE FIRST TUNNEL UNDER THE HUDSON RIVER IN OVER 100 YEARS. IT'S THE ONE AREA OF COMMON GROUND THAT WE'VE TALKED ABOUT AS IT RELATES TO OUR ASPIRATIONS AND WHAT THE PRESIDENT AND HIS ADMINISTRATION HAVE TALKED ABOUT. BUT SO FAR, AT LEAST, OUT OF WASHINGTON, THERE'S BEEN A LOT OF WORDS, BUT WE NEED MONEY, WE NEED A MAJOR INVESTMENT BY THE FEDERAL GOVERNMENT. IT'S A GREAT OPPORTUNITY NOT JUST FOR NEW JERSEY, FOR THE ENTIRE REGIONAL ECONOMY, AND THAT'S SOMETHING WE'RE ALL OVER.

QUINTANILLA: GOVERNOR-ELECT, THANKS FOR YOUR TIME.

MURPHY: THANK YOU FOR HAVING ME.

QUINTANILLA: GOOD TO TALK TO YOU. GOVERNOR-ELECT PHIL MURPHY OF NEW JERSEY.

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