Democrats Get Behind ‘Tax Fairness,’ Hoping Christie Will Back Gas-Tax Hike

But governor argues there is no linkage during radio interview, saying it’s up to legislators to present him with a plan

Analilia Mejia, executive director of New Jersey Working Families, testifies yesterday in the Senate Budget and Appropriations Committee. On her right are Ginger Gold Schnitzer from the New Jersey Education Association, Dave Pringle from Clean Water Action, and Jeff Tittel from the NJ Sierra Club.
Two bills that seek to entice more New Jersey residents to stay in the state during their retirement years by offering new tax cuts were passed by a key Senate committee yesterday.

And though the measures have no direct connection to New Jersey’s Transportation Trust Fund, Democratic sponsors are hoping their advancement now brings Gov. Chris Christie, a second-term Republican, a big step closer to accepting a gas-tax increase that would renew the ailing trust fund.

In fact, the bills seeking to phase out New Jersey’s estate tax and to ease state taxes on retirement income like pensions and 401(k) plans cleared the Senate Budget and Appropriations Committee on a bipartisan basis yesterday — a good sign for those hoping to see Christie and the Democrats ultimately hammer out a bipartisan deal to renew the trust fund before it runs out of cash at the end of June.

But Christie later downplayed the link between the transportation-funding issue and the tax-cut legislation during a live radio show yesterday evening, fueling concerns that Democrats are moving the tax cuts to appease the governor with no guarantee that their efforts will result in a deal to renew the trust fund with a gas-tax increase.

The push for a bipartisan deal on transportation funding comes as the state’s latest five-year spending plan for road, bridge, and rail-network improvements will expire on June 30. That’s because all of the revenue coming in from the trust fund’s primary source of cash, the state’s 14.5-cent gas tax, will soon be needed to pay down the fund’s significant debt, leaving no money for new projects after the end of June.

The fund also hit its legislatively authorized debt ceiling late last year.

So far, Christie hasn’t said exactly how he plans to extend the fund, and he’s largely left the issue up to lawmakers to resolve as the June 30 deadline has drawn near. But he also said in his budget address last month that he is willing to work with Democrats who control the Legislature on a bipartisan basis to renew the trust fund, which pays for more than $3 billion in annual infrastructure improvements counting federal matching dollars.

Christie also hasn’t firmly closed the door to the gas-tax hike that Democratic legislative leaders say is needed to maintain the fund. And it was Christie who loudly linked the transportation-funding issue to the estate tax back in September, while speaking to a group of business leaders in Morris County, saying any proposal to renew the Transportation Trust Fund should also provide New Jersey residents with “tax fairness.”

He went on to identify New Jersey’s estate and inheritance taxes — New Jersey is one of only two states to tax both estates and inheritances — as prime candidates for a cut. And during his State of the State address in January, Christie said the estate tax should be repealed.

[related]Democrats have come to agree in part with Christie on the issue of the estate tax, reviving a bipartisan bill in the new legislative session that began in January to phase out the tax by 2021. The measure is sponsored by Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Bergen) and Sen. Steve Oroho (R-Sussex).

Under the bill, the estate-tax threshold would rise from $675,000 to $1 million starting in 2017, and again to $2.5 million in 2018. It would then increase to $3.5 million in 2019, and to $5 million in 2020, before a full repeal in 2021.

While putting the bill up for the eventual 9-0 vote that advanced it out of the committee yesterday, Sarlo said he hopes Christie gets the message that lawmakers want a broader plan on transportation funding that incorporates the “tax fairness” favored by Christie and other Republicans.

And the committee a little while later also easily passed a bill that would increase over three years the state income-tax exemptions for retirement income from pensions, 401(k) plans, annuities, and IRAs. The measure would eventually take exemptions that right now are $15,000 for single taxpayers and $20,000 for married couples filing jointly up to $75,000 for single taxpayers and $100,000 married couple filing jointly.

“I hope today is a signal to everyone, including the (Christie) administration, that the Senate is serious about working with the administration and treasury on tax fairness, looking to renew the Transportation Trust Fund,” Sarlo said.

He also downplayed concerns that were raised during the committee meeting about the revenue that might be lost to the tax cuts, at least in the short term, pointing to normal growth in tax collections that should occur by the time the changes are fully phased in.

And Oroho, a certified financial planner, said he thinks the estate-tax phase-out specifically could end up boosting tax collections. High net-worth residents who right now are being urged by their accountants to retire in lower-tax states like Florida to avoid New Jersey’s estate tax would remain here instead, he said.

The current state budget projects about $750 million from both the estate and inheritances taxes, with roughly half coming from the estate tax itself.

“I firmly believe it will end up paying for itself,” Oroho said.

Christie’s office did not respond to a request for comment on the Senate committee’s actions yesterday, and though Christie held a news conference yesterday afternoon to announce a new nomination for the state Supreme Court, he only took “on-topic” questions from reporters.

But the governor did address the possibility that an estate-tax cut could be swapped for a gas-tax increase when asked about it on the air last night by NJ 101.5 FM radio host Eric Scott. In response, he said the estate tax should be eliminated, but he also said he didn’t think the two issues right now are linked because Democratic legislative leaders have yet to put a proposal before him.

“Not as far as I’m concerned,” Christie told Scott.

And since proposals to increase a tax must start in the state Assembly, Christie said the onus is on legislative Democrats to draft and advance a plan if it features a gas-tax increase.

“All tax increases must originate in the Assembly, so they need to do something,” Christie said. “If their solution is a tax increase well then they need to step up and put their proposal forward.”

Christie was not pressed by Scott to explain what he would do to renew the fund if he opposes the tax increase preferred by Democrats.

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