TAX NEWS - June 2010

Millionaire's tax veto stands

TRENTON — Democratic lawmakers in the state Assembly failed to override Gov. Chris Christie's veto of their income tax increase for millionaires Monday, unable to muster any of the seven Republican votes they needed to succeed.

The Assembly voted 47-33 to override Christie's veto of legislation that would have spent the revenue generated by the higher tax on senior citizens' property tax rebates. The effort needed 54 votes to succeed, or two-thirds of the Assembly.

Lawmakers didn't actually hold an override vote on the companion bill that would have raised the tax rate in 2010 on income more than $1 million from 8.97 percent, which is the top rate, to 10.75 percent. Nonpartisan budget analysts forecast that would have generated $637 million in revenue.

Debate on the Assembly floor was very similar to one month and one day earlier, when the Senate and Assembly passed the bills, only to see them vetoed within minutes by Christie, who said tax increases would hurt the state economy. The refrains are likely to be repeated throughout next year's midterm elections.

"The reality is that we need tax relief for our seniors this year," said Assemblyman John Wisniewski, D-Middlesex, who is also the Democratic Party state chairman. "The way to get tax relief for our seniors this year is to correct the mistake that this governor's made. That's what it is. He should admit it, he made a mistake. This governor vetoed a piece of legislation that helps people."

Assembly Minority Leader Alex DeCroce, R-Morris, said the state budget can't support worthy programs because Democrats ravaged the economy through a litany of tax increases dating to 2002.

"The fact of the matter is you abrogated your responsibility when you were in charge, when you had the governor behind you. You didn't do your job. And so what I'm saying to you: Take responsibility now. Do what's supposed to be. Work with this governor to make sure we have the money in the budget down the line, so we can do the things that are necessary for our seniors," DeCroce said.

Christie's proposed budget eliminates this fall's annual mailings of property tax rebates in favor of quarterly tax credits that would begin in May 2011. This reduces spending on that property tax relief for seniors and other households with incomes under $75,000 by $848 million in the coming state budget year.

"We've heard repeatedly from naysayers that this legislation is nothing but theater. To them, I say this is not theater to the 600,000 seniors and disabled residents who are staring down a Christie tax hike," said Assemblyman Paul Moriarty, D-Gloucester. "This is not theater to the seniors who call my district office worried about how they will keep their homes and pay their taxes. This is reality. This is a painful reality for those citizens."

Assemblywoman Amy Handlin, R-Monmouth, said: "Senior citizens are the smartest citizens of all. They know there is no money. They know about living within your means. And they know they can't be helped by phantom allocations of imaginary money.

"What can help them is a 2.5 percent hard cap on property taxes, which would finally rescue every citizen from the endless upward spiral of taxation."

Christie has been pushing lawmakers to put a proposed constitutional amendment on the November ballot that would limit increases in property taxes to 2.5 percent with exceptions only for capital expenses and debt service. But it seems unlikely the bill will be considered before the deadline for a November 2010 referendum.

Democrats in both the Senate and Assembly blocked procedural efforts by Republicans to advance Christie's cap proposal.

Senate President Stephen Sweeney, D-Gloucester, announced Saturday he will propose legislation that sets the cap at 2.9 percent, down from the current 4 percent cap. Current exemptions would remain, such as for health care costs, pension costs and drops in state aid.

Sweeney said property taxes rose 3.3 percent last year — less than the cap allowed. He said property tax increases could be held below 2.5 percent even with a 2.9 percent statutory cap, rather than a hard constitutional cap, which he said is too inflexible to work.

"I'm telling you, zero would be better. And I think we will continue to get lower, and I think we will exceed, over the years, do better than what the governor proposed," Sweeney said.

Sweeney said the State Health Benefits Plan is likely to announce next month that health care costs for local governments will rise between 20 percent and 35 percent. That sort of increase would be difficult under a hard cap, he said.