Senate and Assembly Democratic leaders yesterday unveiled competing plans to provide property tax credits to those earning up to $250,000, but they were in full agreement on one thing: Republican Gov. Chris Christie's plan to cut income taxes 10 percent is dead.
"Property tax relief is on its way. Income tax cuts to the wealthy are not going to be had in this budget," Senate President Stephen Sweeney declared in a morning radio interview. "I am not negotiating an income tax cut. I can tell you that right now."
Both the Senate and the Assembly Democratic proposals would provide property tax relief though credits on state income tax returns – the method used by the Republican Whitman administration in the late 1990s – rather than through the direct property tax credit program now in place that replaced the much-criticized system of mailing out property tax rebate checks.
"We felt that passing a law to make the property tax credits part of the income tax would guarantee that they would stay in place because they could only be undone by a future act of the legislature," Assembly Majority Leader Lou Greenwald (D-Camden) explained in an interview. "This governor has had no problem raiding funds that should have gone into property tax rebate or property tax credit programs to balance his budget. It's too easy to cut property tax credits in the budget."
Greenwald and Sweeney both cited a NJ Spotlight study showing that net property taxes rosefrom $6,244 to $7,519 during Christie's first two years in office, largely because the GOP governor's budget made deep cuts in property tax rebates that had averaged $1,037 for most homeowners during the last year of the Democratic Corzine administration.
Interestingly, Christie and Republican legislative leaders did not immediately attack the Democratic property tax credit plans, but instead signaled their willingness to work together on a compromise tax cut proposal -- presumably one that would salvage the income tax cuts for wealthier taxpayers and small business owners that are the crux of Christie's proposal.
While the Republican income tax deduction on property taxes of the late 1990s was criticized by Democrats for providing wealthy landowners with credits as high as $25,000 because it had no ceiling, both the Senate and Assembly Democratic plans unveiled yesterday avoid that problem by providing income tax credits only on the first $10,000 in property taxes paid.
The Assembly plan laid out by Greenwald, Assembly Speaker Sheila Oliver (D-Essex), and other lower house Democratic leaders is the more aggressive proposal, promising aof up to $2,000. The Assembly plan provides a maximum credit of $1,000 in 2012 (a 20 percent cut on the first $5,000 in property taxes), rising to a maximum cut of $1,250 in 2013 on the first $6,000 in property taxes paid, to $1,500 on up to $7,500 in property taxes in 2014, and finally to the full $2,000 on up to $10,000 in property taxes in 2015.
Greenwald estimated that the average family would receive a property tax credit of $1,552 by 2015 -- about 50 percent more than under Corzine in 2009.
To fund the property tax credit program, the Assembly's plan would use the $1.4 billion estimated cost of Christie's fully implemented Fiscal Year 2016 income tax cut, add in the more than $700 million now dedicated to direct property tax credits averaging $480 per homeowner, and -- most controversially -- increase income taxes on the 16,000 New Jerseyans earning more than $1 million beginning in Fiscal Year 2013. The top rate would increase from the current 8.97 percent to the 10.75 level imposed by Corzine as a temporary surcharge in the depths of the Great Recession of 2007-2009, and would raise $800 million -- just under 30 percent of the cost of the Assembly proposal.
"I can tell you there was a lot of discussion over whether the governor would sign a millionaire's tax, but I am not going to compromise my principles or my belief that there should be shared sacrifice in this state," Greenwald said. "The governor has vetoed over good legislation we have passed."
Christie is trying to cut income taxes by 10 percent across-the-board, which would lower the top rate to just under 8.1 percent, and has stated emphatically that he will veto any income tax increase – which is one reason that Sweeney and Senate Democrats left the millionaire's tax out of their property tax credit plan after two years of watching the governor veto similar bills they had passed.
The Senate plan laid out by Sweeney yesterday provides a $100 credit in 2012, a 4 percent property tax credit of up to $400 in 2013, an 8 percent credit of up to $800 in 2014, and a 10 percent cut of up to $1,000 in 2015. Property tax credits for renters would be increased from $50 to $200 -- higher than the $150 maximum under the Assembly plan. The Senate property tax credit would cost the same $1.398 billion that the Christie income tax cut is projected to cost by Fiscal Year 2016.
While Standard & Poor's sharply questioned Christie's revenue projections and the ability of the state to make and sustain more billion-dollar tax cuts over the next several years, both the Senate and Assembly property tax credit plans accept Christie's optimistic forecasts of a 7.5 percent revenue increase next year and similar healthy growth in the years ahead, but divert the money from paying for Christie's proposed income tax cut to pay for their property tax credit program.
"This plan for real middleclass tax relief offers a clear and undeniable contrast between our priorities and those of Gov. Christie," Sweeney declared. "Millionaires have already gotten their tax break from him. It's time the middle class got theirs."
Sweeney projected that the average family earning $50,000 would save $600 under his property tax credit, and the average family earning $100,000 would save $800, compared to just $80.50 and $275 respectively under the Christie income tax cut plan. Christie's income tax would give millionaires a $7,265.75 tax cut and those earning $3 million would gain $25,200 in tax savings -- while they would get zero from Sweeney.
Christie, Senate Minority Leader Thomas Kean, and Assembly Minority Leader Jon Bramnick (both R-Union) did not specifically attack the Democrats' property tax proposals yesterday, and generally ignored the property tax vs. income tax and middleclass vs. the wealthy arguments that have been the staple of Democratic criticism since Christie first unveiled his 10 percent across-the-board income tax proposal during his State of the State speech two months ago.
Instead, they somewhat sarcastically welcomed Democrats to the debate on tax cuts. "I am glad to hear that Democratic leaders have finally come around to the Republican view that New Jersey's taxpayers need help," Bramnick said. "For too long, Trenton has debated which tax to increase, but now it looks like we're going to have a serious discussion about which tax to reduce. No matter the outcome, taxpayers will win that argument."
Kean added that "we can find common ground if the Senate president abandons his vow not to negotiate and instead works with Republicans and the governor on a tax relief plan that addresses the needs of all New Jerseyans" -- one that would include an income tax cut. He said the Sweeney plan "needs improvement in a bipartisan fashion like we achieved on the historic 2 percent property tax cap."
Christie tried to jump a step ahead and gloss over the gulf between Democratic plans pegged specifically to offsetting the property tax burden for lower- to upper-middle-income taxpayers and his own plan to cut income taxes that is heavily tilted toward relief for the wealthiest 1 percent who pay close to half of New Jersey's total income taxes.
"I'm really happy to hear what Sen. Sweeney had to say this morning because it's now clear that both me and Sen. Sweeney agree that income taxes need to be reduced," Christie told New Jersey 101.5 host Dennis Malloy. "I want to do it by a rate cut; he wants to do it by credit, but that's just the details. We're now agreed that income taxes need to go down. He wants to do it by 10 percent credit; I want to do it by 10 percent cut. The good news for everybody listening out there is that you now have myself and Sen. Sweeney agreeing on the fact that income taxes in New Jersey need to go down."
Greenwald shrugged off Christie's comments last night, and said he would be happy if the governor is willing to accept Democratic proposals to provide property tax relief to middle-income taxpayers through income tax credits by calling it an "income tax cut" and declaring a political victory for his side.
"If that makes him sleep well at night as he puts his head on the pillow, I don't care what he calls it," Greenwald said. "Just get real relief to real people and stop playing class warfare."