Democrats Giving Christie Three ‘Tax Cuts’ — Just Not the One He Wants

Mark J. Magyar | June 21, 2012 | Budget
Senate, Assembly committees to vote today on budget, millionaire’s tax, Earned Income Tax Credit

From left: Stephen Sweeney (D-Gloucester; Sheila Oliver (D-Essex); John Wisniewski (D-Middlesex); Lou Greenwald (D-Camden).
For Gov. Chris Christie, it must be like a bad horror movie. Earlier this week, he likened Democrats to vampires — recalcitrant ones who won’t stay dead despite the stakes through their hearts. Now he may be facing an even more fiendish foe: zombie Democrats called back to life after years of acquiescing to the governor’s agenda.

After a week of caucuses, phone calls and behind-the-scenes cajoling, the Senate and Assembly budget committees today are expected to call the governor’s bluff on his threat to veto any budget that did not include an immediate tax cut — a threat that implicitly carries with it the possibility of a government shutdown July 1.

To Christie’s chagrin, the Democratic-controlled committees today are expected to approve a third version of the “millionaire’s tax” that he has already vetoed twice and an expansion of the Earned Income Tax Cut for the working poor.

But the Democratic panels will refuse to pass a bill appropriating the $183 million he has set aside in the budget for an income tax cut the governor has been campaigning for in New Jersey town hall meetings and at Republican events and fundraisers coast-to-coast since January.

Democratic legislative leaders insist it is fiscally responsible to put the $183 million earmarked for a tax cut into a special surplus fund dedicated to property tax relief that would only be allocated if the Christie administration hit its revenue projections for the upcoming budget year. Democrats consider this unlikely after three consecutive months in which revenues came in below projections and Treasurer Andrew Sidamon-Eristoff was forced to come up with $672 million in one-shot revenues and other maneuvers to rebalance the Fiscal Year 2012 and 2013 budgets.

Senate Budget Committee Chairman Paul Sarlo (D-Bergen) reiterated that the Legislature is sending Christie a $32 billion budget only because he refuses to negotiate his 7.3 percent revenue growth projection, which is not only the highest in the nation, but three times the national average.

Overly Optimistic

“I want to make it clear that we still recognize that these are very overly optimistic numbers,” Sarlo said. “But ultimately, this governor is going to have to live and die by these revenues. He’s going to own this July 1 . . . Ultimately, if the revenues don’t come in as he’s projecting, he’s going to have to come back to us with spending cuts in the near future.”

Spending cuts, Sarlo said — not requests to appropriate the $183 million set aside for tax cuts. If David Rosen, budget director for the nonpartisan Office of Legislative Services, is right, Christie’s revenue projections will be off by $724 million to $824 million – which will not only eat up the state’s skimpy $300 million surplus, but the $183 million set aside for tax cuts as well.

Christie, who last month called Rosen the “Doctor Kevorkian of the numbers” for daring to lay out revenue numbers that threatened to kill his tax cut, compared Sarlo and other Democratic leaders to vampires in making it clear that the Democratic budget plan would be dead on arrival.

Corzine Vampires

“The last couple of weeks we’ve seen an ugly type of Democrat rear its head again,” Christie said, stalking back and forth animatedly at a Cedar Grove Town Hall meeting Tuesday. “I think you thought you had slayed this type of Democrat in 2009, that you had taken the wooden stake and put it through this kind of Democrats’ heart.”

“Two and a half years into my term, you thought the Corzine Democrats were dead and they’re back. They’re back and they’re going to tell you now over the next 12 days, we’ll put money in the budget for a tax cut and we’ll give it to you in January . . . They say, ‘Trust us, trust us.’”

For Democrats, however, it’s about not trusting Christie, and about the fear that his “New Jersey Comeback” will prove to be the “New Jersey Setback,” as Assembly Budget Committee Chair Vincent Prieto (D-Hudson) put it. His concern is that this spring’s lagging revenue numbers indicate that New Jersey’s economy continues to sputter, as it did last year when the state’s Gross Domestic Product actually shrank 0.5 percent.

Senate and Assembly Democrats were divided over the millionaire’s tax a week ago. Assembly Democrats were determined to push Assembly Majority Leader Lou Greenwald’s plan to increase the top tax bracket on the state’s 16,000 millionaires from 8.97 percent to 10.75 percent. That would raise $789 million to fund an additional $1,000 property tax credit for senior citizens making up to $150,000 and non-seniors up to $75,000.

The Senate, however, was split over whether to send Christie yet another millionaire’s tax to veto. Senate President Stephen Sweeney (D-Gloucester), had originally decided not to include a millionaire’s tax in his plan to offer property tax credits up to $1,000 for those earning up to $250,000, and his plan was praised — and ultimately endorsed — by Christie until it, too, sank under the weight of the terrible April revenue numbers.

By yesterday, however, the Senate was on board with the millionaire’s tax, as Greenwald had predicted last week.

Clearing Committee

“My expectation is that we will pass the budget bill out of the committee,” Senate Majority Leader Loretta Weinberg (D-Bergen) said confidently yesterday. “And I know that the millionaire’s tax – or as I prefer to call it, the ‘more than millionaires’ tax — has support in the Democratic caucus.”

While Weinberg and Greenwald are confident there will be unity on the millionaire’s tax, the budget bill is a different story. Sweeney has exactly the 21 Democratic votes needed to pass the budget in the Senate, but it was unclear yesterday if Assembly Speaker Sheila Oliver (D-Essex) had rounded up the 41 votes needed for approval in the lower house — a list that Sweeney had requested in writing.

Politically, the Democratic strategy in certifying the governor’s $31.2 billion budget — even though most Democrats believe Rosen’s projection that he is more likely to come up at least $700 million short — is to demonstrate to voters heading into Christie’s 2013 gubernatorial reelection year that the governor ginned up the revenue numbers to justify a popular tax cut the state cannot afford.

Demonstrating Their Discontent

However, Senators Barbara Buono (D-Middlesex) and Richard Codey (D-Essex) — both potential Democratic gubernatorial candidates in 2013 — and Shirley Turner (D-Mercer) want to vote against the budget to demonstrate in part their discontent with the revenue projections. They’re also unhappy about Christie’s use of one-shot revenues, including his diversion of $475 million in clean energy and affordable housing funds and his use of $260 million originally earmarked for the Transportation Trust Fund to balance the budget.

With Buono, Codey and Turner off the bill, Sweeney has exactly the 21 votes needed for Senate passage Monday. Sweeney ousted Codey as Senate president in 2009 and replaced Buono with Weinberg as Senate majority leader in 2011, so their independence is not unexpected.

Similarly, in the Assembly, former Assembly Majority Leader Joseph Cryan (D-Union), who was replaced by Greenwald in 2011, has been the most vocal opponent to passing the Christie budget virtually intact with the governor’s high revenue numbers. Oliver can afford to lose up to six votes from Democratic dissidents and still have the 41 needed to pass the budget bill without having to ask for Republican support.

Like Christie, the GOP minority in the Senate and Assembly is unlikely to support a budget bill that does not include an immediate tax cut, as Senate Minority Leader Thomas Kean Jr. (R-Union) made clear last week in ridiculing the Democratic plan to “make New Jerseyans wait for a tax cut when the money’s already there.”

The budget bill includes $142 million in new spending added by the Democratic-controlled Legislature and offset by cuts elsewhere in the budget, Sarlo said.

Line-Item Veto

Christie last July used his line-item veto powers to eliminate hundreds of millions of dollars of new programs added by the Democrats. But that was a different scenario, because the Democratic budget last June included the millionaire’s tax and anticipated $400 million more in revenue that Christie’s treasurer did — which would have put the state $400 million deeper into the red this spring if Christie had acquiesced, as Republican legislators have repeatedly pointed out over the past several months.

First, the $50 million added to fully restore the Earned Income Tax Credit for the working poor from 20 percent of the federal poverty level — a first-year Christie budget cut — to the previous 25 percent of the federal poverty line starting in this fiscal year was initially a Christie budget initiative, although his tax cut would not have kicked in until the following fiscal year.

Second, Sarlo said there is strong Republican and Democratic support for a $25 million expanded appropriation for nursing homes.

The other programs were among those cut or scaled back by Christie in his budget proposal. The only other large appropriation is a $25 million increase in the judicial budget designed to improve access to the courts for the poor.

Remaining appropriations include $4.14 million in additional aid for school districts whose enrollment has grown more than 13 percent since 2008; $1.5 million for the NJ After 3 after-school childcare program for low-income families in inner cities; $4 million for the NJ Cares for Kids child care program; $3 million more for the Educational Opportunity Fund for low-income college students; $4 million more for technology aid for non-public schools.

Other grants ranging from $1.5 million to $3 million would provide more senior van services, boost nurses’ pay, increase library grants, provide cancer screening for low-income residents, and more funding for cancer research. The smallest of the grants is a $50,000 appropriation for a sexual assault program at Morristown Memorial Hospital.