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May 19, 2009
Only seniors to get property tax rebates
Revised N.J. budget adds $400M in tax increases
By MICHAEL SYMONS GANNETT STATE BUREAU
Property tax rebates will be suspended this year for homeowners except senior citizens and the disabled under Gov. Jon S. Corzine's revised budget proposal, state Treasurer David Rousseau told the Assembly Budget Committee Tuesday.
An additional $400 million in tax increases also were added to the budget plan, including higher income taxes on households earning over $400,000 and increases on insurance premiums and health maintenance organizations. And Rousseau warned that businesses might wind up with an even bigger hike in payroll taxes starting in July.
The rebate change saves the deficit-riddled state $459 million. Corzine's original budget plan limited rebates to households with incomes under $75,000, down from last year's $150,000 cap. Now 510,000 more households lose rebates averaging $670 to $890.
"Unfortunately, due to the severe revenue decline, we're going to have to suspend for this year the rebates to nonseniors," Rousseau said.
Though 612,000 senior-citizen households won't experience a cut in their rebates, others shouldn't expect the rebates to return in 2010, said Assemblyman Joseph Malone III, R-Burlington, recalling the 2006 shutdown of state government to secure a sales tax increase, with half the proceeds guaranteed for property-tax relief.
"That's going to be horrific," Malone said. "We shut the state of New Jersey down for a week, we made absolute promises in stone. Look, can anybody believe anything that comes out of this building?"
The rebate change was among $1.6 billion in revisions revealed Tuesday for what is now a $28.6 billion proposed budget for fiscal 2010, not including federal aid and dedicated fees.
Corzine has scrapped a $25 million incentive program designed to encourage school districts to use their federal stimulus funds to expand preschool, though $52 million more for preschool programs in Abbott school districts remains.
Four-year and community colleges receive a nearly $40 million increase in aid. Rousseau said the state has to spend more stimulus money on higher education to meet federal formulas requiring aid not be reduced. The change restores $15.4 million to Rutgers University and $7.5 million to the 19 community colleges.
Colleges will have to agree to cap their tuition increases to receive part of the restored aid, Rousseau said.
The proposed surcharge on income taxes paid by the wealthy is being expanded. Taxpayers with incomes of $400,000 or more would be affected, rather than those at $500,000 and above. And a higher surcharge would apply to incomes over $1 million.
In all, about 61,300 income tax filers would pay higher taxes. The tax rate would change from 6.37 percent to 8 percent on household income between $400,000 and $500,000; from 8.97 percent to 10.25 percent for income between $500,000 and $1 million, as first proposed in March; and from 8.97 percent to 10.75 percent on income over $1 million.
Rousseau said the surcharges are intended to be applied for one year only.
Rousseau said the fiscal 2010 budget still has a $120 million contribution into the unemployment fund meant to reduce the size of a tax hike businesses face in July, but he cautioned that money might wind up being cut.
"As this process goes through, I can't sit here today and say that it definitely will be made," Rousseau said.
Tax increases also are planned for insurance premiums and HMOs, Rousseau said.
The Corzine administration also is now projecting it will collect $200 million in delinquent taxes through its amnesty program, up from the $100 million that was first projected. That money would help balance the current budget, which ends June 30.
The proposed budget relies on $42 million in additional federal stimulus aid and permission from the federal government to waive its rules and allow the state to shift $228 million from state to federal funds for prescription drug programs for the elderly.
Corzine proposes more rebate cuts By Jonathan Tamari and Adrienne Lu
Philadelphia Inquirer Trenton Bureau
Property-tax rebates would be eliminated for all New Jersey homeowners and tenants younger than 65 under the latest budget cuts proposed by the Corzine administration.
That means 500,000 more homeowners would lose the $900 to $1,000 checks meant to offset New Jersey's highest-in-the-nation property-tax bills. Renters would lose checks of less than $100.
State Treasurer David Rousseau also said the administration would raise income taxes, for one year, on people earning between $400,000 and $500,000. The tax rate on income above $1 million would rise to 10.75 percent, giving New Jersey the highest top rate in the nation.
The rebate plan, crafted in the face of a stunning drop in state revenue, goes directly against one of Corzine's campaign promises as he heads into a tough reelection battle. While running for governor in 2005, Corzine pledged to raise rebates 40 percent.
Taxes on insurers would also rise, the state's pension funding would slip slightly further, and a preschool expansion plan would be put on hold, as part of a proposal outlined yesterday to close a $1.6 billion shortfall in the budget beginning July 1.
Senior citizens and those with disabilities would not be affected by the rebate cuts.
Corzine first proposed rebate reductions and income-tax hikes in March, but the ideas pitched yesterday represent even more sweeping steps to address the state's worsening budget picture. In all, 1.7 million renters and homeowners would now lose rebates they received in 2008.
Rousseau said the proposals come in the face of a historic decline in state revenues triggered by the national economic crisis.
"We face some of the most difficult choices ever on how to fulfill our constitutional obligation to balance the budget," Rousseau told the Assembly Budget Committee.
Assemblyman Joseph Malone (R., Burlington), the ranking Republican on the panel, accused Democrats of breaking a promise they made in 2006, when they raised the sales tax and pledged half of the new revenue to property-tax relief.
"There is nothing that's fundamentally honest and truthful, other than circumstances will always change, and we will always break our promises," Malone said. "Once again it's a smack in the face of middle-income New Jerseyans."
Democrats said all states are facing dire fiscal times. Assemblyman Louis Greenwald (D., Camden), chairman of the Budget Committee, said that in a worst-case scenario, rebates would be suspended until the economy turns around.
"We need to get to the bounce-back period," he said.
The cuts and tax increases for the new budget come after Corzine recently closed a $1.2 billion deficit in the current fiscal year.
The rebate reductions would save the state, and cost homeowners and tenants, $976 million, up from the $517 million Corzine proposed in March.
Then, he called for eliminating the rebates for 500,000 homeowners under 65 who earn between $75,000 and $150,000, the income cap for the checks, and trimming the program for others. Now all tenants and homeowners in that age group would lose the checks entirely. That includes about 740,000 renters.
Rousseau stressed that senior citizen homeowners and tenants would still receive about $600 million in rebates. Roughly 500,000 senior homeowners are slated to get rebates averaging $763 or $1,295, depending on income.
Corzine would raise $83 million by increasing the tax rate for income between $400,000 and $500,000.
A tax filer earning $450,000 would see his or her rate grow to 8 percent, from 6.37 percent. That would cost an additional $815 in income taxes. An estimated 17,000 filers fall into this bracket, which had not previously been targeted for tax increases.
Millionaires' top rate would go from 8.97 percent to 10.75 percent. For someone earning $1.1 million, that means a $1,780 tax hike. Millionaires would pay $200 million more on top of a separate tax hike proposed in March.
Corzine had previously proposed raising the rate on income above $500,000 to 10.25 percent. That plan remains in place for those earning up to $1 million.
Rebates have seesawed in recent years, and many Democrats and political analysts contend there is little public backlash to cuts. Senate President Richard J. Codey (D., Essex), serving as governor in 2005, slashed the checks but left office with robust popularity.
Rutgers political scientist Ingrid Reed said a cut wouldn't surprise voters.
"There's enough controversy about whether the rebates are a good idea at all that, compared to the amount of money the state will be saving, many will probably see the move as a good choice," said Reed, director of Rutgers' New Jersey Project.
Patrick Murray, director of the Monmouth University polling institute, said the public had already turned on Corzine on the property-tax issue. "It's just one more nail in the coffin as far as the voters' opinions on property taxes," he said.
Christopher Christie, a candidate for the Republican gubernatorial nomination, quickly called Corzine's plan "a declaration of war on the middle class." His main opponent, Steve Lonegan, has called for scrapping all rebates, labeling them "a scam."
Earlier in the day, David J. Rosen, chief budget officer of the nonpartisan Office of Legislative Services, described the state's revenue expectations as "awful or horrible."
Looking ahead, Rosen forecast even more dismal budgets. With federal stimulus aid set to dry up in the coming years and pension payments likely to grow to $3 billion, the state could face an annual structural deficit of $6 billion, Rosen said.
Contact staff writer Jonathan Tamari at 609-989-9016 or jtamari@phillynews.com.
Star Ledger – ‘Say goodbye to property-tax rebates, N.J. treasurer says’
May 20, 2009 John Reitmeyer
TRENTON -- Property tax rebate checks billed as long-term relief just a few years ago are the latest casualty of New Jersey's budget woes.
Treasurer David Rousseau said Tuesday rebate checks would be canceled this year for all but senior citizens and disabled residents because the state budget is suffering a record loss in tax revenue in the bad economy.
Paul Mulshine: A primer on New Jersey's property-tax fund
The state would also raise income taxes on people earning $400,000 to $500,000 and those earning over $1 million and cancel the expansion of a preschool program as part of Gov. Jon Corzine's plan to close a multi-billion-dollar budget gap, the treasurer said.
"We face the most daunting challenge of any budget in state history," Rousseau told the Assembly Budget Committee. Corzine's budget and tax plans require approval by lawmakers.
Last year more than 1.3 million rebate checks were sent out -- averaging more than $1,000 to household and tenants earning under $150,000. The budget Corzine presented in March proposed keeping property tax rebates for households making less than $75,000, as well as for seniors and the disabled. This latest cut would save $943 million.
Rousseau billed the decision to hold back rebate checks as a one-time suspension.
"Unfortunately, due to the severe revenue decline, we're going to have to, for this year, suspend" most of the rebate program, he said.
Cutting the rebates, along with other budget adjustments announced by Rousseau -- including the shelving of a proposed $25 million preschool initiative Republicans have targeted -- puts the proposed budget at $28.6 billion. In March, Corzine proposed a $29.8 billion spending plan.
The budget is now in the hands of lawmakers, who must approve it by June 30.
Rousseau said the state would take in $400 million in new revenue for the budget by hiking the tax rates on more affluent residents.
The tax rate would go from 6.37 percent to 8 percent for households earning $400,000 to $500,000. People who earn $1 million or more would see their tax rate rise from 10.25 percent to 10.75 percent.
Corzine's plan would also increase taxes on insurance premiums and health maintenance organizations, Rousseau said.
Rousseau's presentation also made official a concession on the budget Corzine announced in March after he initially proposed eliminating the property tax deduction on state income forms for all but senior citizens and disabled residents. The new version of the budget allows households making up to $150,000 to keep the deduction.
Budget Committee Chairman Lou Greenwald (D-Camden), an outspoken proponent of the rebate program, blamed the cut on revenue collections that are at "unprecedented, historic lows."
"The program isn't being eliminated," he said. "It's obviously being maintained for senior citizens and the disabled."
Earlier Tuesday, David Rosen, the budget and finance officer for the nonpartisan state Office of Legislative Services, predicted that over the next 15 months, revenue will come in nearly $3 billion less than what Corzine had projected in March.
"This is certainly the worst revenue report that I've ever given to the Legislature," Rosen said.
The latest version of the property tax rebate program was rolled out in 2007, when, as is the case again this year, the Assembly was up for reelection.
The 2007 rebate program provided checks to households earning as much as $250,000 using a $2.2 billion budget allocation. Last year, however, the rebate program was restricted to households making up to $150,000.
Corzine proposed scaling back the rebate program to just households making $75,000 or less when he proposed the new state budget in March.
Cutting rebates for all but senior citizens and disabled residents leaves only $640 million in the budget for rebates this year.
Democrats made the inflated rebates a big part of their 2007 election message, contending they were sustainable. "The rebates are substantial, but they are only a down payment on a long-term commitment to tax relief and tax reforms," Assemblyman Joe Cryan (D-Union) said at the time. Cryan, a member of the budget committee, also chairs the state Democratic Party.
Assembly Republican Budget Officer Joe Malone said today the Democratic promise from 2007 "just evaporates like it's never been said."
"There is no value and there is no integrity in people making a commitment or a promise," said Malone (R-Burlington).
Corzine, who also faces re-election this fall, has already announced $1.2 billion in spending adjustments for the current budget to ensure the state closes the fiscal year on June 30 without a deficit, something that's required by the state constitution.
They include deferring pension contributions and school aid payments, raiding surplus funds and making changes and cuts to department budgets.
The committee, meanwhile, voted today to advance a bill to allow school districts to borrow money to offset delayed state aid payments Corzine has proposed. It cleared along party lines, with Democrats approving and Republicans voting no.
Categories: Budget, Economy, News, Politics, Statehouse, Taxes
