The Democratic-controlled Legislature called Gov. Chris Christie’s bluff yesterday, voting unanimously to raise income taxes on millionaires but refusing to vote for the tax cut Christie wants until the governor’s revenue estimates start coming in on target.
Now it’s up to Christie to decide how to get what he wants out of the five-month battle over income tax cuts, property tax cuts, millionaire taxes, and revenue projections that has dominated the Statehouse since he first called in January for a 10 percent income tax cut that would cost the state $183 million in its first year.
The Republican governor vowed Friday to give Democrats “one long, hot summer ‘til they cut your taxes,” and he issued a statement after yesterday’s vote asserting that the real aim of the “Corzine Democrats” is “to hold tax relief hostage.”
“I will not allow New Jersey to go back to the same failed policies that nearly put our state over a fiscal cliff," Christie said.
But even though the New Jersey governor constitutionally is the most powerful in the nation, Christie’s options are limited in the face of a united Democratic Legislature. Senate and Assembly Democrats voted unanimously to pass a $31.7 billion budget based on Christie's robust revenue estimates, but set aside the $183 million needed for the tax cut in a special surplus fund until they could be sure that revenues would indeed grow by 7.3 percent and not fall as much as $700 million short as the non-partisan Office of Legislative Services has projected.
“To sequester $183 million is to say you don’t trust the governor’s revenue estimates,” Senate Minority Leader Thomas Kean Jr. (R-Union) said angrily.
“Well, to be clear, we don’t,” Senator Barbara Buono (D-Middlesex) shot back.
With five days to go before the Saturday midnight June 30th constitutional deadline for enactment of a balanced budget, Christie apparently has three veto choices:
He could get out his red pen, as he has threatened, and use his line item veto to eliminate most or all of the $55 million in new social service and education-related programs added by the Democratic-controlled Senate and Assembly Budget Committees last week, and perhaps wipe out enough additional spending near and dear to Democrats to show a “savings” of $183 million or more. That doesn’t get Christie his tax cut, but he could call the Legislature back in for a special session to demand that they act on tax relief, and if they refuse to do as he wishes, he can campaign throughout the summer all the way to the Republican National Convention in Tampa denouncing the Democrats for refusing to enact a tax cut.
He can conditionally veto another tax bill, rewrite it as a tax cut, then send it back to the Legislature to be voted upon as a condition for his approval of the budget bill, whose terms he could then negotiate with the Democratic leadership.
He can issue an absolute veto, sending the budget back to the Legislature and essentially warning the Democrats that if he does not receive an acceptable budget bill by Saturday midnight, he will shut down the government for the second time in six years.
“I haven’t talked to him,” Senate President Stephen Sweeney (D-Gloucester) said last night as he mulled over Christie’s options. “He can CV [conditionally veto] it, line-item veto it, but I don’t think he’ll do an absolute veto. There’s no need for it. The tax cut is in the bill, and if the money’s there, it will get done. What citizens need to understand is that it wouldn’t matter if we passed the tax cut three months ago, it still wouldn’t happen until next January.”
While Sweeney and Democrats debated what Christie would do about the budget, there was no question how he would handle the “millionaire’s tax.” For the third year in a row, Christie will veto an income tax increase on the wealthy -- this time for a 10.75 percent top income tax rate on New Jersey’s 16,000 millionaires in order to fund increased property tax credits for senior citizens making up to $250,000 and non-seniors up to $150,000.
“It’s a short flight to Florida, and many of our citizens have already booked the flights for the number of days it requires to be Florida resident,” Assembly Minority Leader Jon Bramnick (R-Union) asserted. “Go to Florida, where there’s no state income tax, that’s the message we’re sending,” he said during the Assembly debate on the millionaire’s tax.
For Christie and Republican legislators, who voted unanimously against the Democratic budget bill yesterday, it’s a matter of locking in the tax cuts. “We’re going to vote on this budget that spends $31.7 billion -- one of the biggest budgets in the history of New Jersey – and yet provide no tax relief?” Assemblyman Jay Webber (R-Morris), the state Republican Party chairman, asked incredulously. “We’re told we have to wait. Wait for what? Why don’t we just cut taxes first and wait to see if we can spend the $31.7 billion when the revenues come in!”
Senate Budget Committee Chairman Paul Sarlo (D-Bergen), however, backed Sweeney’s insistence that “nothing is lost by waiting. This timetable may not satisfy the governor’s political timeline,” he said in a swipe at Christie’s interest in having an income tax cut to boast about at the Republican National Convention, where he is considered one of the leading contender for vice-president or convention keynote speaker.
However, Sarlo couldn’t help noting that Christie won’t be getting the 10 percent across-the-board income tax cut he originally proposed that was skewed toward the wealthy.
“I’d like to thank the governor for coming around to the idea of a property tax cut for the middle class,” Sarlo said, referring to Christie’s agreement in May to support Sweeney’s plan for a property tax credit on income taxes of up to $1,000 if Sweeney would raise the income limit from $250,000 to $400,000.” The Christie-Sweeney deal quickly fell apart when April revenue numbers released the following day showed tax collections coming in well below projections.
Sarlo noted that Christie’s estimate of a 7.3 percent increase in revenues was the highest in the nation and well above the 4.1 percent national average, even though New Jersey’s Gross Domestic Product shrank 0.5 percent last year and the state ranked 47th in economic growth, ahead of only Alabama, Mississippi and Wyoming.
“The revenue estimates are beyond the realm of reality,” Buono said, asserting that it made sense to set aside the $183 million earmarked for a tax cut by Christie as surplus. “We have increased the surplus as a partial protection against what I consider the inevitable” -- the shortfall in the Christie administration’s revenue estimates predicted by David Rosen, OLS’s budget director.
Buono criticized Christie for “drawing a line in the sand over an irresponsible tax cut” and said he was “delusional and out of touch with reality” for proposing an income tax cut that favored the wealthy. “If we’re going to make any tax cut, it needs to be a cut in the most regressive tax, the property tax.”
Bramnick, the Assembly minority leader, said, “The problem with this budget is that it is one big maybe. It’s no longer appropriate to sit on the fence and say maybe we can have a tax cut.” He urged Democrats to follow Christie’s forceful example: “Let’s cut taxes. No maybes.”
Bramnick’s argument stirred Assembly Budget Committee Vice-Chairman Gary Schaer (D-Passaic), who drove back from his father-in-law’s funeral in Connecticut yesterday morning to vote on the budget, to abandon his intention not to join in the debate.
“The people of New Jersey want a fiscally responsible Legislature, not a Legislature that makes promises it cannot fulfill because of rosy revenue projections,” Schaer said.
“Show me the money!” Schaer demanded, quoting Cuba Gooding’s famous line from the 1996 movie Jerry Maguire. “Ladies and gentlemen, what is wrong with showing the money?”
Schaer insisted that citizens do not want tax cuts when they have to borrow the money to pay for them, referring to the Christie administration’s decision to borrow an additional $261 million for the Transportation Trust Fund to replace New Jersey Turnpike Authority funds that were being shifted into the general fund to help balance the budget and provide the needed funding for the tax cut.
Assembly Majority Leader Lou Greenwald (D-Camden) echoed Schaer’s argument following yesterday’s budget vote.
“How does it make sense to borrow money for a tax cut that families will be paying for over the next 30 years just to give the governor a good sound bite for Tampa?” he demanded.
However, Assemblyman Declan O’Scanlon (R-Monmouth), the ranking Republican on the Assembly Budget Committee, said a tax cut is crucial to New Jersey’s future. “Whether we agree with the tax cut Governor Christie proposed or the one proposed by Steve Sweeney, cutting taxes would send a message,” O’Scanlon said, insisting, “Our taxes are all too high.”
As to what Christie will do what the Democratic budget, O’Scanlon said, “I’m sure what the governor delivers as a final product will be vastly improved.”