Sweeney, Prieto Vow Fight For Millionaire’s Tax, Pension Funding
Democrats argue wealthy should pay higher taxes, but Christie threatens to veto any income tax hike
Senate President Stephen Sweeney (D-Gloucester) and Assembly Speaker Vincent Prieto (D-Hudson) vowed yesterday that Democrats would stand shoulder to shoulder to push through a millionaire’s tax and make sure that the state lives up to its commitment to fund the deficit-ridden pension system.
But Republican legislators have made it equally clear that they will vote to uphold Gov. Chris Christie’s promised veto of an income tax increase on the wealthy, which makes the Democrats’ decision to push again for a millionaire’s tax essentially doomed to failure because they do not have the two-thirds majority needed to override a Christie veto without some GOP votes.
Christie has vetoed three previous Democratic attempts to reimpose income tax increases on the wealthy similar to the 2009 surcharge imposed by Democratic Gov. Jon Corzine, which raised the current top rate of 8.97 percent to 10.25 percent on income over $500,000 and 10.75 percent over $1 million. Politically, Christie would end any chance he had of winning the GOP presidential nomination in 2016 if he signed an income tax increase even if he believed it made sense to do so -- which he doesn’t.
What the Democratic decision to push a millionaire’s tax does is add a debate over whether the wealthy are not paying their fair share of New Jersey’s taxes, as Democrats and labor leaders contend, or whether high income and inheritance taxes are already pushing the wealthy to leave the state, as Republicans and business leaders argue.
Sweeney contends that New Jersey’s budget problems, which led Christie to cut $2.4 billion in pension payments promised in Fiscal Years 2014 and 2015 to plug the most recent deficit, stem from the state’s slow economic growth and Christie’s unwillingness to consider raising taxes to meet the state’s spending needs.
The Senate president declared, “We don’t have a spending problem, we have a revenue problem” -- the exact opposite of Christie’s argument when asked about tax increases.
"I don't believe in class warfare, but I don't believe in the middle class and the working poor being constantly the ones who have to bear the burden here,” Sweeney said yesterday at a rally on the Statehouse steps organized by the Better Choices Coalition, an alliance of labor and progressive groups. “There's one group of people paying much less and doing much better, and that's the wealthy. What we're asking them to do is chip in and be part of this.”
“We have been protecting the mega-rich while the working class and the poor have been crushed by this administration,” Prieto asserted. “Protecting a few millionaires is not in the interest of the masses of the working class of New Jersey.”
The Democratic argument, as Senate Budget Committee Chairman Paul Sarlo (D-Bergen) put it at a hearing yesterday, is that over the past four years, the Christie administration has provided more than $2.3 billion in business tax cuts and $2.1 billion in tax incentives and abatements to businesses to stay or relocate in New Jersey, and the wealthy have saved another $2.5 billion on income taxes because of the failure to extend Corzine’s millionaire’s tax.
Meanwhile, Hetty Rosenstein, New Jersey state director for the Communications Workers of America, pointed out at the rally that Christie has vetoed restoration of the Earned Income Tax Credit for the working poor, and “seniors and middle income families have lost 75 percent of the property tax rebates they received in years before.”
Gordon MacInnes, president of New Jersey Policy Perspective, noted that the number of New Jersey taxpayers reporting more than $500,000 in income rose from 27,000 to 47,000 between 2002 and 2011, and that the top 50 income tax filers in New Jersey earned an average income of $128 million.
“When you get to the bottom of the list of these poverty-stricken New Jerseyans, the individual income is $47 million. It’s really hard to live in New Jersey on $4 million a month,” MacInnes said sarcastically, suggesting that they could afford to pay more.
However, Sen. Steven V. Oroho (R-Sussex), who serves on the Senate Budget Committee, yesterday echoed Christie’s argument earlier in the week that the wealthiest taxpayers own homes in multiple states, and have choices of where to live -- and where to pay taxes.
Because of New Jersey’s highly graduated income tax -- which imposes a tax rate of 1.4 percent on family income up to $20,000 and 1.75 percent up to $50,000 at the low end and 8.97 percent above $500,000 – the wealthiest 1 percent of New Jerseyans pay 40 percent of the state income tax, and the 10 wealthiest taxpayers pay as much income tax as the bottom 2 million filers, Christie has repeatedly pointed out.
Holding up a Boston College study showing that high tax rates had caused an exodus of wealth from the state, Oroho expressed concern about the “domicile issue, where somebody doesn’t have to move, but can just spend extra time in one place, and be able to change from a resident to a nonresident return.”
A New Jerseyan who spent 50 percent of the year plus one day living in Florida, which has no income tax, would only have to pay income tax on New Jersey business activities and New Jersey capital gains, instead of all of his or her income, which could cost the state $4 million in tax on the $47 million taxpayer MacInnes described.
Oroho asserted that tax changes do change behavior, noting that the current budget crisis was caused in part by high-income taxpayers shifting income from 2013 into the 2012 tax year to avoid an increase in the top federal income tax rate from 35 percent to 39.6 percent.
Treasurer Andrew Sidamon-Eristoff said his department has already launched a longitudinal study of income tax filing patterns to analyze the questions Oroho raised.
“I believe we will find a trend of people arranging their affairs to avoid our transfer inheritance tax,” Sidamon-Eristoff said.