New Jersey lawmakers consider tax on wealthy

TRENTON (AP) — It's the million-dollar question surrounding budget talks in New Jersey.

As Gov. Chris Christie and lawmakers head toward a June 30 budget deadline, Democrats who control the Legislature have proposed raising taxes on residents whose income tops seven figures.

It's an issue tailor-made for Democrats and Christie to play to their bases. It also looks to have a slim chance of becoming part of the 2016 budget, so why are some lawmakers focusing on it?

Here's a closer look at one of the issues driving debate around Chrisite's$33.8 billion 2016 budget proposal:

WHAT ARE DEMOCRATS PROPOSING?

Senate President Steve Sweeney has introduced a plan to raise taxes on income over $1 million, from the current rate of 8.97 percent to 10.75 percent. The surcharge would last for four years and would bring in $675 million in fiscal year 2016. Sweeney says the proposal would affect 17,000 people.

WHY ARE THEY PUSHING THIS?

Democrats say the tax is needed to help the state meet financial obligations. In reality, the treasurer and the Legislature's budget expert think 2016 revenues will beat expectations. Democrats also say the tax wouldn't be necessary if Christie's stewardship of the economy were more successful.

But there's more to it than that. Christie has proposed reducing a legally required payment to the state's public pensions that Democrats object to. The parties are fighting it out in court, and a decision is pending before the Supreme Court. The problem involves the budget because Democrats neither want to decrease the pension payment nor cut programs they view as important. The added revenues help them achieve those aims.

WHERE DOES CHRISTIE STAND ON THIS?

Christie has vetoed similar proposals four times before and vowed in his budget address this year he would oppose income tax hikes.

WHERE DOES THAT LEAVE THE PROPOSAL?

Christie has the power of a line-item veto and can simply cut the tax hike out, if Democrats send him a budget that includes it. To overcome this, Democrats would need to override the veto, but Republicans have blocked these efforts repeatedly.

WILL THE MILLIONAIRES' TAX ENABLE THE STATE TO MAKE THE PENSION PAYMENT?

No, not alone. The pension payment for next year is set by a 2011 statute at about $3 billion. Christie has proposed paying $1.3 billion toward it. Added to the revenue expected from the proposal, the state would still be about $1 billion short.

HOW WILL THE STATE MAKE THE PAYMENT, THEN?

That's not clear. Treasurer Andrew Sidamon-Eristoff says he is considering that question in case the court requires the full payment. Democrats have not revealed exactly how they would make the payment but have said they would.

HOW DOES POLITICS PLAY INTO THIS FIGHT?

Analysts have said there are potentially presidential and gubernatorial forces at play. Christie, who is considering a White House bid, is loath to raise taxes, knowing that he may have to appeal to the GOP's conservative base. Democrats, who are angling for the 2017 gubernatorial race, traditionally seek to court labor support and the tax proposal comes as the pension payment dominates the budget debate. Democrats and public sector unions are traditional allies in New Jersey.

For his part, Christie has said the tax shows Democrats' approach to problem-solving, potentially offering a glimpse of how the party might run the state if it captures the governor's office in 2017. Democrats say Christie's refusal to consider the idea demonstrates his difficulty managing the state's finances.

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