For the fourth time in the past five years, the Democratic-controlled Legislature will be sending Gov. Chris Christie a millionaire’s tax to veto. The only question is whether Christie will get to veto a corporate business tax increase and a cut in the Business Employment Incentive Program too.
With the June 30 constitutional deadline for passage of a balanced budget looming, Senate and Assembly Democratic leaders said yesterday they expect to pass a revised budget that will rely primarily on a millionaire’s tax to boost state revenues enough to restore $1.5 billion Christie cut from the state’s pension payment for Fiscal Year 2015. The two houses of the state legislature still have to agree on details, but the outline of the proposal is clear: increase taxes on the wealthy and include the legislatively mandated pension payment.
One day after Senate President Stephen Sweeney (D-Gloucester) unveiled a plan to increase income taxes on the wealthy, raise corporate taxes, and suspend business tax subsidies in order to fully fund the pension payment, Assembly Speaker Vincent Prieto (D-Hudson) outlined his budget priorities yesterday.
Prieto one-upped Sweeney by promising not only to restore the pension cut, but also to add funding for women’s healthcare, boost the Earned Income Tax Credit, and increase funding for nursing homes and domestic violence programs.
“New Jersey families know the importance of having access to quality healthcare for women and the elderly, working-class tax relief, and living up to our promises,” Prieto declared. “This budget lives up to their expectation. A budget is a statement of priorities, and this budget plan makes clear our priorities are those of
New Jersey’s middle-class and working poor.”
Unlike Sweeney, however, Prieto was fuzzy on the details of just how he would pay for restoration of the pension payment and the other programs he is proposing.
Prieto said he would “love it to be a true millionaire’s tax” imposed only on income over $1 million — as opposed to Sweeney’s plan, which would not only raise the 8.97 percent top income tax rate to 10.75 bracket on income over $1 million, but also add a 10.25 percent bracket for income between $500,000 and $1 million.
The Assembly speaker said he was not sure if a 15 percent surcharge on the corporate income tax — which would raise the top rate from 9 percent to 10.35 percent on corporate income over $100,000 — was the right number, and he said he would have to look closely at Sweeney’s plan to make a one-year $175 million cut in Business Employment Incentive Program tax subsidies for businesses to locate or stay in New Jersey.
Without tax hikes or cuts of that magnitude, Prieto would not have enough money in the budget to pay all of his proposed funding increases. For that reason, Senate and Assembly budget negotiators are likely to end up with a $34.7 billion budget bill that closely resembles Sweeney’s plan by the end of the weekend.
In a way, however, it doesn’t really matter much whether the Democratic budget bill limits income tax increases only to income over $1 million or broadens the base by adding an 8 percent bracket on income between $350,000 and $500,000, as Sen. Raymond Lesniak (D-Union) recommended in his tax proposal last week.
Christie has made it clear that he will veto any increase in the income tax, the corporate income tax, or any other broad-based tax, and he is committed to the continuation of the business tax abatement program as an incentive for companies to locate or stay in New Jersey.
And Republican legislative leaders made it clear yesterday that their caucuses would vote unanimously to sustain Christie’s vetoes of any Democratic-proposed tax increases, as they did the last three times Democrats sent a millionaire’s tax to Christie’s desk.
Sen. Joseph Kyrillos (R-Monmouth) said the Democrats’ call for tax increases on corporations and the wealthy “sends a terrible signal to companies considering relocating in New Jersey, and to higher-income residents who could move to Florida for six months of the year to avoid paying income taxes here.”
Assembly Minority Leader Jon Bramnick (R-Union) charged that “Democrats are taking the ‘Florio’ approach,” referring to the $2.8 billion tax increase pushed through by Democratic Gov. Jim Florio in 1990 that cost Florio his governorship and Democrats control of the Legislature for a decade.
“Democratic leadership should work with Republicans and Gov. Christie who want to reduce the tax burden on all our residents. We cannot follow a path that drives residents out of our state because of ever-increasing taxes,” Bramnick said.
Sweeney and Senate Budget Committee Chairman Paul Sarlo (D-Bergen) both said they tried to reach agreement with Christie on a negotiated budget that would restore the $1.5 billion pension cut through temporary — rather than permanent — tax surcharges, but that the governor would not budge.
“I don’t know what his political ambition is,” Sarlo said of Christie, a likely candidate for the GOP presidential nomination in 2016 “But his political ambition needs to be put aside so that we can reach agreement on a balanced budget that meets the state’s needs and is not balanced on the backs of the working class, the poor, police, firefighters, and teachers.”
“We’re headed for a train wreck on this budget,” Lesniak said. “I tried to offer a reasonable compromise with a millionaire’s tax increase offset by repeal of the estate tax, but the governor just rejected it.”
Senate Minority Leader Thomas Kean (R-Union) said Republicans are hoping to persuade Christie to agree to their proposals to spending cuts in Medicaid and other programs in order to eliminate the need for $137 million in tax increases and fee hikes contained in Christie’s budget.
“My hope is that we can continue to make the state more affordable,” Kean said. “It’s not just the big tax increases proposed by the Democrats that we have to fight. It’s also the smaller tax-and-fee increases that add up to make us less competitive.”