Tax Cut Compromise Possible, Says Assembly Budget Boss [AUDIO]
Governor Chris Christie wants to cut income taxes by 10% for every New Jerseyan. Senate Democrats want to cut property taxes by 10% and Assembly Democrats have a plan they say can provide a 20% property tax cut for those who need it most.
The latter plan would be partially funded through a millionaires' tax increase that Christie vows to veto, but the Assembly budget boss says there's room for compromise.
Early last week, the State Treasurer reported a $230 million revenue shortfall and another $121 million shortage was reported Wednesday. Christie's $32.1 billion proposed budget relies on 7.3% revenue growth.
Yesterday, the credit rating agency Moodys put out a less than flattering statement regarding Jersey's fiscal situation. It read, part, "Without any cuts, deferrals, or one-time revenues, a $230 million decrease in projected reserves would leave the state with a narrow $358 million (1.2% of budgeted revenues) ending balance. This would be lower than in any of the past five years, when the state's balances ranged between $500 million in fiscal 2008 and $870 million in fiscal 2011. The revenue shortfall has reduced liquidity over the past fiscal year, and the state has relied on inter-fund borrowing to support operations, although the amount has remained relatively small. The state maintains approximately $800 million of reserves outside the General Fund that are available for internal borrowing."
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The report did not take into account the $121 million shortfall because those monies are outside the general fund and obligated to spending elsewhere.
The sagging revenues put every tax cut plan in jeopardy.
"There's room for negotiation," says Democratic Assembly Budget Committee chairman Vinnie Prieto. "Obviously we have to live within our means so obviously we have to have the money there."
Prieto says if the state can't afford to support the Assembly Democrats' 20% property tax cut plan, that doesn't mean the proposal is dead. He explains, "If it's not 20%, if it's 15% then that's what it will be, but we have to get the money back to the residents…..If it's 18%, 16%, whatever…That would be something that's real."
The Assembly Democrats proposal would provide a property tax relief credit through the gross income tax return, for all residential homeowners with incomes up to $250,000 in the amount of 20% of the first $10,000 in property taxes paid.
To pay for the new revenue needed for the middle-class and lower-income property tax relief under the Assembly Democrats' plan, the state's income tax rate for those earning more than $1 million would be increased beginning next fiscal year. The rate would go from 8.97 percent to 10.75 percent. This would impact about 16,000 out of about 2.6 million filers and raise $800 million at the plan's full implementation in fiscal year 2016. And, that's where the problem lies because Christie hasn't been shy about his thoughts on that particular tax increase.
In his budget message, the Governor said, "We have eliminated the special surtax that for a time gave New Jersey the highest marginal tax rate in the nation - and I am proud to have twice vetoed the effort to re-introduce it. And just so there is no mistake in my intention: I will veto any tax increase again."
Townsquare Media was the first to report that under a new plan proposed by State Senate President Steve Sweeney, a family earning $50,000 a year would save, on average $600, and a family earning $100,000 a year would save an average of $800; millionaires would get absolutely zero. Under the governor's proposed income tax scheme, a family earning $50,000 a year would only save $80.50, and a family earning $100,000 annually would only save $275, while a millionaire would get a $7,265.75 tax break and those earning $3 million would save $25,200 a year.
The Sweeney plan would focus every dollar of tax relief on the 95 percent of New Jersey households that earn up to $250,000. The Christie proposal, by comparison, would give those families only an average of $218 in relief, while the top 5 percent would get an average of $4,632 and the top 0.6% would get an average of $22,577.