UPDATE: Murphy will announce he’s found $1B in N.J. spending cuts, with big reductions in public workers’ health care costs

Gov. Phil Murphy is set to propose raising taxes on New Jersey’s most affluent taxpayers with a surcharge on income over $1 million, sources told NJ Advance Media.

The increase, which Murphy will propose in his second state budget address Tuesday, would extend a higher tax rate enacted last year for income over $5 million to income over $1 million, according to sources familiar with the spending plan.

That means the top marginal tax rate of 10.75 percent would kick in on the first dollar over $1 million and drum up $447 million for the state.

The proposed tax increase would help Murphy finance increased spending on K-12 education, pre-kindergarten, government worker pensions, transit, community college and help for the working poor.

About 39,000 taxpayers — 20,000 residents and 19,000 nonresidents — would have to pay this millionaires tax, compared to only 1,760 taxpayers who are now paying more under the higher tax that kicks in on income over $5 million.

The Democratic governor will unveil his proposed budget with a speech before the state Legislature on Tuesday afternoon.

This will be the second year Murphy seeks the so-called millionaires tax — a proposal that will put him at loggerheads with top Democratic lawmakers who say they have no appetite for new taxes.

State Senate President Stephen Sweeney, D-Gloucester, has said he won’t agree to raise any taxes next year without significant spending reforms. Sweeney has said New Jersey needs structural reforms in areas like government worker benefits and spending on schools, not more taxes.

“I’m not gonna change my position. There have to be structural reforms before you can talk about taxes," Sweeney told NJ Advance Media on Friday. “Until we talk about actually dealing with structural reforms, there’s no sense talking taxes because all you’re doing is continuing a cycle of every year taxing or finding new taxes so you don’t have to deal with the 800-pound gorilla in the room.”

And state Assembly Speaker Craig Coughlin, D-Middlesex, said he’s “insistent that next year’s budget not include new tax hikes" and urged the governor to focus on finding savings instead.

The millionaires tax was just a little over a year ago a foregone conclusion in New Jersey politics. Murphy promised to raise the income tax to restore “tax fairness” in the Garden State. And Sweeney considered it one of the Legislature’s top priorities.

But by the time Murphy took office in January 2018, Sweeney had soured on the millionaires tax. The Senate president said federal tax reforms adopted a month earlier, namely the new $10,000 cap on state and local tax deductions, had made raising income taxes in New Jersey untenable.

A months-long standoff ensued and negotiations went down to the wire. In the end, they cut a deal to avert a shutdown and to raise income taxes on income over $5 million and impose a surtax on corporations with net income over $1 million, as well as new taxes on Airbnb stays, e-cigarettes and ride-sharing.

NJ Advance Media staff writer Brent Johnson contributed to this report.

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.