How to pay for a $1.7 billion tax cut?
That's the question for Gov. Chris Christie Tuesday as he delivers his budget address to the Legislature.
The address, scheduled for 2 p.m., will be streamed live on www.PressofAtlanticCity.com and likely will be dominated by the 10 percent, across-the-board cut in state income tax that Christie announced in his State of the State speech in January.
Democrats have attacked the proposal as a giveaway to the wealthy, and the group Better Choices for New Jersey plans a protest outside the Statehouse. The group generally opposes cuts to services while supporting taxes "based on ability to pay."
New Jersey, still recovering from the recession, is expected to collect $326 million less in revenue than it did under the current $29.7 billion budget. That budget came together after a flurry of Christie line-item vetoes in late June hacked out $1.3 billion from programs and left Democrats fuming. After the budget was done, Senate President Stephen Sweeney, D-Salem, Gloucester, Cumberland, told a newspaper that Republican Christie was "a bully and a punk."
The state's constitution mandates a balanced budget, so any shortfall in tax revenue would have to be made up with cuts to programs or services.
Christie's income-tax cut would be phased in over three years. David Rosen, budget chief for the nonpartisan Office of Legislative Services, told the Senate Budget and Appropriations Committee on Jan. 30 that the cut would cost the state $1.7 billion, including about $150 million in the fiscal year that starts July 1.
The state's income-tax rate is graduated; it rises with a taxpayer's income. The cut would therefore benefit the top taxpayers the most. The state's seven income-tax brackets range from 1.4 percent for people earning as much as $20,000 to just less than 9 percent for people paid more than $500,000.
Rosen said residents earning $30,000 would save $45.50 over three years, while the cut would mean between $7,266 and $25,206 for state residents who earned more than $1 million.
Local legislators said they were interested in hearing what the governor had to say about the state's fiscal status.
Sen. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, said he hoped to hear that the state would continue to not borrow and spend beyond its revenue.
Van Drew, a member of the Senate Budget and Appropriations Committee, conditionally supported a tax cut, but only if the state continues to pay into the pension system and the move does not require the state to borrow or raid any of its funds. He said he would like to see a broader benefit across all incomes. He also supported a property-tax cut, in the form of a credit to municipalities that would be directly applied to local property taxes.
Sen. Jim Whelan, D-Atlantic, however, questioned the income-tax proposal.
"I didn't realize we had turned the corner on the economy," he said.
Like Van Drew, though, he said he would prefer to emphasize cuts to property taxes.
Whelan said he hoped there would not be cuts to municipal or school aid, because he said those cuts directly shift costs to local taxpayers.
Assemblyman Chris Brown, R-Atlantic, said he hoped his first budget as a state legislator would see lower taxes.
"What I think is great is we are discussing ways of giving the taxpayers money back instead of asking for more," he said. "Even if it does not go through as presented, I think it's a good shift in policy to try to spur economic development and investment and making us more competitive with surrounding states."
Brown also said he hoped the governor would mention a proposal sponsored by Whelan that would allow boat manufacturers to qualify for state Economic Development Authority loans to manufacture renewable-energy equipment.
Assemblywoman DiAnne C. Gove, R-Ocean, Burlington, Atlantic, said she anticipated the governor delivering a balanced budget and said the state should limit its spending.
"I don't want our taxes raised," she said. "I want us to live within our means."
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